Study: Many have no cohesive business-plan
December 29, 2014- BOSTON–(BUSINESS WIRE)–Fidelity Institutional Wealth Services®, a leading custodian for registered investment advisor (RIA) firms, today released findings from The 2014 Fidelity RIA Benchmarking Study,1 which revealed many firms2 recognize the need to improve when it comes to marketing and business development: only 5 percent feel their firms are advanced in these areas, and seven in 10 do not have a plan in place to guide them toward better business results, a number that has gone unchanged since 2011.3
“As firm leaders sit down to think through their 2015 strategic plans, they should consider looking to their peers for insights on what is working and ideas on where to focus to make the most impact.”
The study looks at what may be holding RIAs back from advancing their marketing and business development efforts and explores the best practices of “High-Performing Firms4” to help RIAs learn from their peers.
According to the study, High-Performing Firms excel in the areas of growth,5 productivity6 and profitability.7 And while many factors can contribute to their success, these firms stand out in several important areas of marketing and business development: firm story, targeting clients, referrals and aligning talent—strategies that may be contributing to their ability to close business in two or fewer meetings and drive more incremental growth than other firms.
“Three-fourths of firms see improving their marketing and business development as a top strategic initiative, but they are struggling to make progress,” said David Canter, executive vice president and head of practice management and consulting, Fidelity Institutional Wealth Services. “As firm leaders sit down to think through their 2015 strategic plans, they should consider looking to their peers for insights on what is working and ideas on where to focus to make the most impact.”
Key Findings of The 2014 Fidelity RIA Benchmarking Study:
- High-Performing Firms are focused on telling a consistent firm story, while half of RIA firms are still struggling to establish on
Only 56 percent of all firms agree that they have a clearly defined and differentiated firm story, and only 43 percent agree their stories are tailored to the specific needs of target clients. High-Performing Firms are 1.7X times more likely to tell a consistent firm story, with all client and prospect-facing associates describing their firm and its key differentiators in the same way. As a result, High-Performing Firms are also more likely to agree that the majority of their clients know the fundamentals of their firm story, which can help clients become advocates for the firm.
- While firms are making progress when it comes to targeting the right clients, High-Performing Firms are almost twice as likely to effectively communicate their target client profiles to help generate the right referrals
Firms with a target client profile reported that 90 percent of new clients added in 2013 fit this description, compared to only 75 percent of clients on board prior to 2013. High-Performing Firms are almost twice as likely to agree that they effectively describe their target client profiles to both clients and centers of influence (COI). This may help clients and COI identify the most appropriate referrals, which may lead to a higher percentage of clients fitting target client profiles over time.
- Few firms have an “advanced” referral process
High-Performing Firms are four times as likely to leverage COI referrals to the fullest. Referrals from existing clients and centers of influence are important channels of growth for RIAs, accounting for 75 percent of all new clients. However, less than one-third of firms rate their referral processes as advanced, or even fairly strong. Only 14 percent agreed that they have analyzed their client base to focus on the clients most likely to make referrals. High-Performing Firms are 4X more likely to say their COI referral processes are advanced. This includes activities such as always thanking sources for referrals and working to understand their centers of influences’ target client profiles so they can send reciprocal referrals. In addition, they are more likely to review centers of influence data, such as referral status, at least monthly and keep data up to date.
- High-Performing Firms have the talent and resources in place…
…while one-third of RIA firms are pursuing business development officers. High-Performing Firms are approximately twice as likely to be pursuing strategic initiatives to develop talent-management plans or change firm compensation plans—signs that they may be managing talent more proactively. They are also less likely to see lack of internal sales and marketing capabilities as an issue and, possibly as a result, are less likely to be hiring business development officers (81 percent not pursuing vs. 66 percent of other firms).
Click here for a video to learn more on the marketing and business development strategies of High-Performing Firms. For additional insights from the study and to see how your firm compares, download Fidelity’s whitepaper: Firing on all cylinders: fueling growth with benchmarking insights.
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Fidelity’s goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.1 trillion, including managed assets of $2.0 trillion as of November 30, 2014, we focus on meeting the unique needs of a diverse set of customers: helping 23 million people investing their own life savings, 20,000 businesses to manage their employee benefit programs, as well as providing 10,000 advisors and brokers with technology solutions to invest their own clients’ money. Privately held for nearly 70 years, Fidelity employs 41,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit www.fidelity.com.
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1 The 2014 Fidelity RIA Benchmarking Study (the “study”) was conducted between May 6 and June 30, 2014, in collaboration with an independent third-party research firm unaffiliated with Fidelity Investments. 411 firms participated. The experiences of the RIAs who responded to the study may not be representative of other RIAs and are not an indication of future success.
2 The terms ‘RIA’, ‘RIA firms’, and ‘firms’ refer only to those firms that participated in the study.
3 The 2011 Fidelity RIA Benchmarking Study was conducted between August 1 and September 26, 2011, in collaboration with an independent third-party research firm unaffiliated with Fidelity Investments. 375 firms participated. The experiences of the RIAs who responded to the study may not be representative of the experiences of other RIAs and are not an indication of future success.
4 The term “High-Performing Firms” refers to the subset of participating firms in the study with business results that met certain qualifying criteria further defined in the study findings report. Reference to the concept of “performing” in the name of this group is not intended to connote investment returns. Past performance is no guarantee of future results. High-Performing Firms are compared to All Other Eligible Firms, defined as the subset of participating firms who met certain eligibility requirements further defined in the study findings report, but who did not qualify as High-Performing Firms.
5 3 year Assets Under Management (AUM) Compound Annual Growth Rate (2010-2013)
6 2013 Revenue per Full-Time Equivalent (FTE)
7 2013 Earnings Before Owners’ Compensation (EBOC) Margin; EBOC Margin = EBOC as a % of revenue