What’s your growth agenda? Exploring 4 levers of organic growth

Growth can be elusive, but a focus on organic growth puts you in the driver’s seat

Whether you look at wealth management or other industries, many firms struggle to demonstrate long-term growth. In fact, Harvard Business School’s research of ~11,000 public companies between 1976 and 2019 revealed that only the top quartile grew (on average by 12% per year), whereas the other three quartiles showed zero or even negative growth rates during that period.² What did the researchers conclude about the firms that sustained growth over time? They had a balanced growth strategy: an approach to growth that coupled the pursuit of market opportunities with the development of the right capacity and capabilities to do so effectively.² This intentional and integrated growth agenda enabled them to succeed over the long term, despite macro-economic and industry changes.

In wealth management, many firms rely on inorganic growth sources to increase assets under management, leaving them vulnerable to forces outside of their control. For example, market appreciation drove an average of 54% of the overall growth in assets under management (AUM) between 2019 and 2023.³ When you remove the impact of the markets, one quarter of firms experienced negative growth in AUM during this period.³

Other firms focus on M&A and recruiting to fuel their growth, which also leaves them subject to industry dynamics. While there is plenty of runway for M&A activity in the years to come, climbing valuations and a concentration of large buyers (many backed by private equity) make it harder for other firms to compete successfully in this space. Likewise, recruiting costs have increased as experienced advisors have more choice than ever before in how they affiliate and operate their businesses, while the industry overall struggles to attract new advisors.

Organic growth is the domain where wealth managers have the most control over whether or not they grow—and how fast. Yet, many firms struggle to grow organically. We define organic growth as new assets gained (from existing clients or new clients) minus assets lost (from departing clients or withdrawals from existing clients). As you consider your growth agenda for the next several years, setting intentional strategies in these four areas can help you increase the assets you manage for both new and existing clients, while mitigating the effects of external factors on your growth trajectory:

1. Your people: Create a thriving team to help propel and sustain growth over time

Wealth management firms are on the hunt for good talent that can fuel future growth, which helps to explain the industry’s focus on recruiting and M&A. But, is your firm well-positioned to retain your people and maximize their contributions over the long term? In a recent study, Fidelity found that only 17% of financial advisors are thriving in their roles, and the remaining 83% are merely surviving.¹ Thrivers were defined as those who reported: high job satisfaction, high effort in their roles, and low to no burnout. The biggest determinant of thrivers versus survivors in this study was burnout. Survivors were more likely to feel emotionally exhausted and burned out sometimes or often at work.

Thrivers report high job satisfaction, high effort, and low burnout

Source: The 2024 Fidelity Financial Advisor Community–Industry Trends Survey

What may help increase the ranks of thrivers? One way to address burnout is to align responsibilities with what each advisor is best at, most passionate about, and most likely to feel energized and valued while doing. People tend to thrive when they are doing something they enjoy and leveraging their strengths versus doing something that drains them. For example, some financial advisors are great at originating business, while others are better at servicing clients. In fact, only 1 in 2 advisors (52%) say they enjoy business development.¹ And, 49% of advisors would prefer that someone else be responsible for new business development (even if they enjoy it), so that they can focus on their current clients.¹

Another way to help address burnout is to provide more tools and support to free up time in the advisor’s day. Model portfolios and managed accounts that reduce the time advisors need to spend on investment portfolios is one example. Marketing tools that create client-facing content or help advisors prioritize which leads to pursue are other examples. In our study, thrivers reported: higher job performance, higher growth rates, and slightly less likelihood to leave their firm versus survivors—demonstrating a number of potential benefits to firms that focus on creating more thrivers among their ranks.¹

2. Your platform: Enhance platform capabilities to enable advisors to grow and be more efficient

There are endless possibilities for how and where a firm can invest to boost growth, which is why it's helpful to first look at the practices of the fastest-growing advisors. According to Fidelity research, the fastest-growing advisors distinguish themselves by focusing on the 3 Ts: time, talent, and tools.⁴

As you think about enhancing your platform to fuel growth, consider these 4 areas where we see leading firms investing.

Creating a client acquisition engine

Firms less reliant on principals and founders for growth exhibited 40% higher organic growth rates than their peers.⁵ One avenue to achieve this is by investing in GrowthTech—technology that can power the entire client journey starting with a prospect’s first interaction with a firm, and help you uncover new opportunities to grow relationships over time. Many fast-growing firms also hire BDOs (business development officers) to take this work off the plates of advisors.

Scaling investment management

Unless their investment management capabilities are differentiated, advisors can outsource investment management to gain time savings—up to 10 hours/week.⁶ The fastest-growing advisors are more likely to have access to a managed account platform, use model portfolios, and use specialists or wholesalers to help with portfolio construction.⁴

Capitalizing on data

The demand for data is greater than ever before among advisors and their clients—as evidenced by increased leverage of APIs (see chart below). Leading firms are investing in data mining, data aggregation, and technology integrations to create more personalized experiences for clients, uncover new opportunities within their prospect and client base, and increase productivity.

Experimenting with AI

Artificial intelligence (both generative AI and other types) has great potential to enhance advisor productivity and the client experience over time. According to Fidelity research, about 7 in 10 investors and advisors see potential benefits of using AI to support advice relationships: but adoption is currently low due to a range of concerns from lack of comfort with the technology to privacy and security concerns.⁷ Firms can start by investing time to understand what AI capabilities exist and how they work. Get demos, consult trusted partners, and start small in testing to explore how these capabilities could help your firm (e.g., creating content for client or employee communications, generating meeting summaries). Establishing policies and procedures that define which and how specific solutions can be used will be paramount.

3. Your clients: Optimize your client base to retain assets as wealth shifts to Gen X

One of the most important decisions a firm can make is who they serve. Currently, the wealth management industry is under-indexed on Gen X, who are poised to inherit 41% of the $72 trillion that is estimated to change hands by 2045.⁸ Gen X comprises just 16% of advisory assets today.⁹ Many in this generation struggle to manage competing financial goals such as: saving for retirement, paying for college, and taking care of aging parents, and could benefit from an advisor. In fact, 44% do not currently work with an advisor today.¹⁰ In comparison to the Baby Boomers, Gen Xers seek more help with financial planning, greater use of technology, and help engaging with their larger family in an advice relationship.¹⁰ Many also would like their advisors to act as connectors, introducing them to other professionals who can solve specific problems or enhance their lives.¹⁰

To help capture the wealth that is transferring to Gen X, one starting point is to assess how your advisors are engaging with the beneficiaries of their current clients. Many advisors employ a reactive versus proactive approach with beneficiaries. For example, a staggering 91% of adult children found an advisor without even considering the one their parents used.¹¹ This isn’t surprising since advisors have reached out to just 13% of their clients' adult children.¹² Instead of thinking of beneficiaries as simply names on forms, what if advisors explore being in a planning relationship with the beneficiary and developing a relationship before assets transfer?

4. Your offering: Refresh your client offering to increase relevancy and differentiation

Anticipating and staying on top of changing client needs is paramount to long-term growth. Since Fidelity first launched the Advice Value Stack in 2017 as a framework to help firms think about the value they deliver to clients, we continue to see changes in what clients need and want from their financial advisors. As you think about equipping your advisors to help clients now and in the future, consider these opportunities at each level of the value stack:

Managing the Money

In the last several years, we’ve seen the launch of new investment products (e.g., alternatives, custom SMAs, active ETFs, digital assets) that provide benefits such as: unprecedented access to private markets, new levels of personalization, and greater tax management for retail investors. But, the proliferation of these new products means that choice and complexity are at an all-time high. Many clients need help from a financial advisor, and many advisors need help from their firms to navigate this choice and complexity. This is where training and education, along with access to these products in the first place, are key to adoption among advisors and investors. Currently, 1 in 2 millionaires doesn’t feel that their advisor provides access to sophisticated investment strategies.¹⁰ This gap presents a significant opportunity for firms to differentiate by providing new solutions that meet this demand.

Achieving Goals

Americans increasingly seek to live life on their own terms, making choices that we didn’t see as much in the past. As a consequence, they require the help of advisors to navigate the financial implications. Here are just a few examples:

• Retiring differently—With Americans living longer, workers are exploring how and even whether to retire. Among younger workers, nearly two-thirds prefer a phased retirement rather than just stopping work at age 65—with many planning to take on passion projects, or start new businesses.¹³
• Living multi-generationally—More parents are financially supporting their adult children—or co-habiting—with real implications for parents’ retirement. In fact, 47% of parents with grown children cover their kids’ expenses—at an average cost of ~$1,400/month.¹⁴ Many between the ages of 18 to 29 are living at home for reasons like saving money or paying down debt.
• Living Abroad—An estimated 9 million Americans live abroad today and must manage their finances across borders.¹⁵ This is likely to continue due to the prevalence of remote work, the availability of “digital nomad visas” and the high cost of living in the U.S.
• Living Solo—28% of households—or 1 in 7 American adults—now live alone.¹⁶ Whether solo by choice or default, these households face higher living expenses, have lower retirement savings, and may lack support as they age.
• Working independently—With a rise in freelancer platforms and growing desire for flexibility, an estimated 45% of the U.S. workforce earn an income independently rather than through an employer.¹⁷ This has financial implications for how they save for retirement to manage living expenses and beyond.

Regardless of the specific scenario, clients can benefit from financial advisors who are able to help them navigate these and other situations. As you consider levers of growth, developing specialized expertise in these areas could be a differentiator.

Peace of Mind

To help clients achieve peace of mind, it’s increasingly important to help them at the intersection of money and life—namely with their health, family, and safety.

• Health. Saving for health care expenses ranks high among investors' financial goals, yet only 1 in 5 says their advisor has helped them with health care planning.¹⁰ As clients age and health care costs continue to rise, this area will become even more important.
• Family. One prevalent need among Gen X and Baby Boomer clients is help with caregiving. Across the U.S., about 14% of the population are caregivers for an aging loved one or friend today.¹⁸ With longer lifespans, even more clients will be thrust into the role of caregiver in the future.
• Safety. Americans are particularly worried about cybersecurity and financial fraud. Yet, many advisors are not helping clients to navigate this. Just 4 in 10 investors say their advisor proactively discusses how to keep them safe from cyber threats.¹⁰

As you think about your current and future client base, which areas are generating the most stress and worry?  And, how well are you and your financial advisors positioned to help alleviate these concerns?

Fulfillment

What it means to achieve fulfillment and create a legacy is continuing to evolve. With more Americans living to the age of 100,¹⁹ clients (and their advisors) will need to think about what it means to leave a legacy over that long of a period. And, what brings purpose and fulfillment to someone’s life is likely to change significantly between ages 45 and 85. The changing American family will also play a pivotal role in people’s plans. In legacy planning, clients and advisors increasingly will need to take into account blended families due to divorce and re-marriage, as well as having more generations alive at the same time.

In addition, Americans are redefining what they’re striving to achieve in life. Experiences, discretionary time, good health, close friends, and enjoyable work are more important to some than owning a home, marriage, and children, which is a significant departure from the past.²⁰ Financial advisors need the right tools and skills to foster constructive dialogue with clients to understand what is uniquely important to each one of them.

Chart a course toward sustainable and profitable growth with a balanced and integrated growth agenda

Regardless of the degree to which you rely on inorganic growth versus organic growth sources today, focusing on one or more of these organic growth areas: creating a thriving team, refining your platform, optimizing your client base, and evolving your client offering can help make your firm’s success less vulnerable to market forces. However, it can be difficult to decide which growth strategies to pursue to grow your firm given the wide array of options available. With client and advisor needs constantly evolving, there’s pressure to add more and more capabilities to better compete for assets, which can erode margins.

To help you start making the difficult decisions about which routes to growth are best for your firm, you may want to:

• Understand the differentiation your firm brings to the market to help simplify decisions about where to invest and where not to.
• Identify where your growth strategies are most vulnerable to outside forces and create mechanisms to mitigate those risks.
• Evaluate which growth opportunities will contribute the most to the long-term sustainability and profitability of your firm versus shorter-term gains.

A balanced and integrated growth agenda with a focus on organic growth can help position your firm for success over the long term, and help you better navigate the inevitable industry and macro-economic changes to come.