Financial advisors are strategically focused on organic growth.
To achieve this coveted type of growth, advisors must strategically incorporate technology throughout their marketing funnel. This encompasses activities such as lead sourcing, data enhancement and conversion – all of which play pivotal roles in driving business success.
Recently, I caught up with Patrick Hannon, Vice President of Fidelity Labs. He shared the importance of strategic partnerships with specialized vendors. These partnerships are how financial advisors can carve out a path towards enduring growth and adaptability amidst the turbulent tides of capital influx and industry transformation.
Transcript:
I think everybody has to think about the staggering amount of capital that has come into the industry in the last three years. I really see that in two areas – one is the roll-up of the M&A for RIAs. The second is the flood of capital coming into wealth tech, and I think that's had profound impacts and downstream effects for financial advisors.
I think first you've got to consider that investors are going to want to return on their capital, right? And I think that's juxtaposed with a couple of key differences in our industry compared to others. The first is regulation. So there are a lot of headwinds for advisors to grow their practice or wealth tech firms that employ technology in the regulatory environment that we have. I think second, you have to look at the growth rates for fintech firms, wealth tech firms. Only four percent of an advisor's tech stack is flipped in a given year. The average hold time for technology is 16 years.
So when you think about that, fintech firms have a lot of challenges in growing quickly with all that capital coming in. And then lastly, as you know, organic growth rates for advisors when you factor out market returns are pretty slim. And so with all this capital coming in, you're going to see investors want that return on their investment despite all these headwinds that advisors have.
I think on the technology side, it's really simplicity. Identify the problems that you're looking for technology providers to have a solution for and just focus on that. I think you're seeing so much noise in the technology space with ChatGBT being a solution for everybody's problem. Just focus on the defining the problem first and then just pick a few vendors that have self-identified with that problem.
On the organic growth rate side, there are businesses focused on that. And if you put emphasis there, just realize you will get an extra return or a higher evaluation on your business if you can show that you have higher growth rates organically.
I think if you think of the marketing funnel, it's lead sourcing, it's data enhancement and then it's lead conversion. And I think you have to think through where you're providing technology in each of those levels to drive through. It doesn't make sense to tackle the bottom two if you don't have lead sourcing figured out. But it's really that combination of all three. Go find vendors to help you with those areas and build that marketing funnel.