Next year could prove to be a difficult year for the financial advisor business if the market weakens as some expect. After all, a company’s earnings are usually tied to its asset level, with lower fees if assets are flat or declining. But there are still growth opportunities for astute companies, whether it’s acquiring other competitors, adding advisors to existing clients, or scooping up clients who have lost trust in their former advisors. In this week’s Big Q of Advisors, we asked five wealth management professionals what to expect from their companies and practices in terms of organic and inorganic growth in the coming year.
Jason Katz
Photo by Matt Greenslade
Jason KatzAdvisor, UBS: My first goal is growth by shrinking. Focus on high quality clients. It’s not necessarily defined by the amount of money, but by the client’s open-mindedness and willingness to let us help them. . Someone could have all the money in the world, but if they are unreasonable, I have no interest in doing business with them. and are happy to do business with people who may not yet have a 7 or 8 digit account.
When it comes to growth rates, I’m in a unique position to challenge the law of large numbers. I run a business with over $4 billion in assets and over $25 million in revenue. It’s kind of hard to grow it with a very fast clip for obvious reasons. The market has been very difficult this year, but our assets and earnings have increased by about 15%. I was deeply moved by this. For organic growth, 5% to 10% is very satisfying. I’m not taking a hard look at the market, I’m just foreseeing the impact of lag after what happened over the past year or so.
John JonesCo-Founder and CEO, Brighton Jones: Next year, we expect 10% growth, noting that the market is flat from 30-09-2022 to 30-09-2022. [the billing year for many firms], which is what we expect. What’s happening to all my peers who are CEOs of companies our size or larger is that budgets for revenue next year are much lower. That’s because most of these companies aren’t growing organically, they’re just riding market waves. Last year, he made just over $10 million in revenue from new customers. This helps counter the headwinds of a down market. I think these are the type of times when the market is stressed and the better companies win disproportionately. Advisors look for companies that offer more services to their clients. So does the client. That’s why I’m excited about the downmarket from a business perspective.
Michael Nathanson
Courtesy of Colony Group
Michael NathansonChairman and CEO, The Colony Group: On the inorganic side, we are targeting at least two deals next year. On the organic side, we’re targeting at least 5% in terms of net new assets, but I think we can do much better than that. We will focus on a few things to better position ourselves for accelerating organic growth. For example, we plan to expand our family office offerings and better encapsulate them from a marketing perspective. Some of the things we try to focus on from an innovation perspective are in line with family governance, looking for opportunities to work with families on their mission, vision and values. We will continue to focus on training and building a culture of growth rather than a sales culture.
There are clearly challenges in the industry, such as competition for talent. When I think of growth, I think of the saying, “If you make it, it will come.” That is why we are actively hiring. We actually launched a recruiting brand called “Seeking the Extraordinary” and continue to focus on making our company a preeminent destination for those seeking a meaningful and enjoyable career.
Erin Scannell, Ameriprise
Courtesy of Ameriprise Heritage Wealth Advisors
Erin ScannellCEO, Heritage Wealth Advisors: It was We delivered our highest organic growth rate to date this year, but the impact of the market has held back our overall growth rate. His goal for next year is $500 million, so 25% growth. Ten-year averages for organic growth are in the 20% range, so next year will see higher than average growth rates. We are putting in place an infrastructure to develop enterprise-level asset growth. This is in contrast to relying on individual advisors within firms to go out and network for new business. I read an article that does not communicate. You may be nervous about tough conversations with clients. We tend to launch attacks at times like this.
Jim Dixon
Courtesy of Sanctuary Wealth
Sanctuary Wealth CEO Jim Dixon said: What I’ve seen historically in the early days of these markets is clients stopped looking at their statements, put their heads in the sand, and said, ‘OK, the market is going to leave and come back. The difference in 2023 is the amount of ups and downs, constant lifeboat drills. So I think 2023 will see a record turnover of clients for new advisors. I think in this kind of market the good advisors really shine and the bad ones get exposed. He thinks organic growth for the company will be around 7% to 10%. The historical average is around 4% or 5%. I think there is a premium they experience for advisors who are actively involved and really providing value. We have great advisors, so I think I’ll join them.
We are also looking at this massive transition of wealth from baby boomers. I think it will continue until 2023. The number of companies selling will increase significantly. The adviser in his 60s has just finished his job, is tired and ready to retire. So I think 2023 will be the highest number of transactions ever.
Jeremy Meshes
Courtesy of Wells Fargo Advisors
Jeremy Mesh, Senior Financial Advisor, Wells Fargo Advisors, said: My revenue growth expectation or target is 15% to 20% annually. Especially in this environment, assets under management are a little different. The types of clients I work with have changed a bit. I still work with everyone I used to work with. But there is a subset of new clients who didn’t explore their options in the past when interest rates were low. And it really kind of opened the door. As such, these clients are looking to capitalize on the fixed income opportunities that are currently available. While the returns for some of these products are lower, the opportunities are tremendous. There is so much money moving in this environment.
Yes, I care about the economy and markets, but I’m not worried about how it will affect my business. It’s a little fresh, actually. I hadn’t been in an environment like this for quite some time, which opened the door for me to talk to different types of clients.
Editor’s Note: Answers have been edited for length and clarity.
Please contact advisor.editors@barrons.com.