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    When talking about increasing practice revenue, the terms growing and scaling are used almost interchangeably, sometimes implying that one is a requirement of the other, as in “scaling for growth.” The implication, in this case, is that increasing operational efficiency facilitates exponential growth.

    But, in true business terms, companies can either increase revenue through growth or through scaling. They cannot do both.

    Why is that distinction important for a financial advisor? Because scaling and growing are two different objectives. A firm’s business strategy, marketing, human capital infrastructure, and even the advisor tech stack are fundamentally affected by which course an advisor chooses.

    So, what is the difference? And which is the right approach for your business?

    Scaling vs Growth in Business

    Business Growth Defined

    When a company grows, it increases revenue at the same rate that it increases costs.

    This model is most evident with products. Take the classic child’s first entrepreneurial business: a lemonade stand. The cost of lemons for two cups of lemonade is double the cost for one cup of lemonade. As the lemonade stand gains popularity with the neighbors, the revenue goes up, but so do the costs.

    In any traditional service industry, the number of service professionals needs to increase (e.g., hire more doctors, more lawyers, or more financial advisors) to serve more people and eventually increase revenue.

    In business growth, costs and revenue are directly proportional. In other words, if you choose to increase revenue by growth, you need to sell more and pay the same per revenue dollar (more hours, more infrastructure, more clients, etc.).

    Business Scaling Defined

    When a company scales, it increases revenue faster than it increases costs. The revenue is going up without the costs going up at the same rate.

    How is that possible? The tech industry is a good example, particularly SaaS (software as a service) online platforms, where each time a new customer pays for the platform subscription, the associated cost is negligible compared to revenue.

    In marketing and sales, calling each prospect on the phone to give a 30-minute pitch of services costs much more than recording a video and sending it in an email or posting it online.

    In business scaling, revenue grows faster than costs. In other words, to scale, you sell more and pay less per dollar (similar hours, similar staff, higher revenue).

    Business Scaling and Growth for Financial Advisors

    When a financial advisor starts signing on more clients, the firm grows, but so does the need for broader or more in-depth expertise, licensed staff, and more advisor hours. The business grows, but the cost per revenue dollar keeps overall profitability stable.

    There are lots of ways to increase profitability per revenue dollar (scale). One example is to outsource asset management. A recent AssetMark study of over 750 financial advisors revealed that outsourcing helps advisors grow their total assets (reported by 91% of outsourcing advisors) and reduce costs (reported by 79% of outsourcing advisors). In this way, more revenue dollars can be acquired without taking on additional staffing, licensing, and oversight costs. So why isn’t everyone scaling?

    Challenges Financial Advisors Face When Trying to Scale

    As wonderful and intuitive as increasing revenue faster than costs sounds, there’s a lot of work and planning that goes into scaling effectively. And each business is different. Here are a few common challenges and roadblocks advisors may face.

    • Human Capital and Workflows
      The who, the what, and the how. Who does what and how at the firm? When is it time to hire vs. make our workflows more efficient? When is it wiser to develop from within vs. bringing on an expert staff member or additional advisor?
    • Client Segmentation
      An analytical look at the service model for various client segments can reveal whether time and resources are expended in ways that will increase client satisfaction and referrals. Is the firm targeting the right prospects and offering clients the right services at the right point in their financial journeys? 
    • Advisor Tech Stack
      Experience-centric firms (whose average revenue per client is 93% higher than those of non-experience-centric practices) had an average of 75 touches per year, according to a 2018 Cerulli study. So many touchpoints would be impossible without tech automation. Is your tech stack enabling your team to do more for your clients?
    • Marketing
      For many advisors, marketing doesn’t always come naturally. Some of the common mistakes include failing to adopt market technology, ignoring data, and not having a clear strategy. Are your marketing efforts defined, efficient and effective?

    How Can Financial Advisors Start Scaling?

    The most common approach is DIY style. Start reading online to learn how to create a business plan or service model. While the grit and pains of self-learning can feel immensely rewarding, it’s also time-consuming and can be hit-or-miss.

    A more focused and intensive alternative is to work with a business consultant who is knowledgeable and experienced in the financial services industry. Outside of consulting services offered by TAMPs, these consultants can be tough to find and expensive – they are highly specialized and take time to immerse themselves in your business to understand your structure and goals.

    Another option is to begin with an online workshop and then dig deeper as your skills develop and new challenges arise. AssetMark offers a complementary course called Advisor Acceleration Academy that takes advisors through the essential routines and tools of scaling and planning:

    • Benchmarked business assessment
    • Strategic business plan
    • Client segmentation
    • Profitable service model
    • Fee schedule
    • Marketing strategy

    These sessions are full of interactive analysis, planning tools, and templates designed to facilitate thoughtful and effective scaling and profitability. The video lessons and resources remain available to attendees in perpetuity, so each is available when the advisor is ready to tackle it.

    Because AssetMark’s mission is to help financial advisors make a difference in the lives of their clients, we aim to provide advisors with holistic support. Advisor Acceleration Academy serves this mission and is open to all advisors, whether they currently work with AssetMark or are considering working with us.

    To continue the conversation with AssetMark about how your practice can scale, contact us.


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    Tag(s): Growth


    AssetMark is a leading provider of extensive wealth management and technology solutions that help financial advisors meet the ever-changing needs of their clients and businesses.

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