By Steven Clark, Senior Managing Director and President of Search
The wealth management industry has a net new growth problem. Organic growth rates across independent RIAs have trended in the low single digits for years, and market appreciation has done most of the heavy lifting. Cerulli pegs net new assets between 3-4%, but even that includes acquisitions. When you strip out market growth and acquisitions, you likely end up with a number that’s 0-2%.
Why is this happening? Here is my read of how we got here:
- High performance owners successfully grew by referrals for years. They stacked several hundred million on reputation capital.
- Eventually, their business hit a scale where their personal referrability was not enough to drive the same growth rate.
- As growth slows, gaps in the business begin to emerge–operations, marketing, talented next-gen advisors, etc.
- They capitalized on the fee-based, non-commission approach that is no longer an exclusive province.
My opinion for those firms looking to grow beyond the founder’s personal performance: the next new growth problem is a talent problem.
The founding team that built the firm to $300 or $500 million was built for a different business than the one sitting in front of them today. The roles that drive net new at scale tend to cluster around the same gaps:
- Head of Marketing. Not someone to post on social media or put out blogs. This is someone accountable for pipeline, measurable top-of-funnel activity, and the kind of output that growth requires.
- Successor Advisors. The CFP planners who can absorb a retiring founder’s relationships and grow them. Not the unicorn advisor bringing a $150 million book. The professional who wants a going concern and the platform to build from.
- Chief Operating Officer. Growth requires capacity. A founder spending 50% or more of their time on operations is not spending it on clients or prospects.
- Compliance Director. A compliance function built for the firm’s complexity three years ago is a brake on what the firm can do today.
- Chief of Staff or Director of Operations. Most of the firms I meet already have this role, but it was usually promoted from within for someone who knew the company well but maybe is not the right personality fit for the job. A specialist here makes a world of difference.
These are just examples, but the pattern is the same. You have team members who have been with you for a long time. They’re good at what they do, but that doesn’t mean they are the right fit or skill set for the executive-type roles you eventually need.
The firms that solve the net new growth problem almost always solve it by solving the talent problem first. They make the organizational investment before the need becomes acute, not in response to a year or two of flat growth. They are honest about the gap between the team they have and the team the business requires.
The wrong hire in a large institution is an HR issue, but the wrong hire at a founder-led firm is a culture problem, a distraction from clients, and a situation that costs far more to unwind than any search fee. Hire hard, manage easy. It is the oldest principle in this practice and still the most frequently skipped step.
Decades of executive search in this industry provide a clear view of what separates the firms that grow from the ones that plateau. If your net new numbers are not where you want them, the answer is probably not simply another marketing initiative. The Gladstone search team is worth a conversation. We’re here to share what we are seeing from the fastest-growing firms and help you find your next exceptional missing piece.
Steven Clark is the Senior Managing Director and President of Search at Gladstone Group. He has conducted executive searches across the wealth and investment management industry for multiple decades. Reach him at steve@gstoneinc.com .