Three Highlights from the MarketCounsel Summit
On December 12 at 5:45pm ET, the section on Bryce Skaff was edited based on feedback from Dimensional.
MarketCounsel’s Summit, held earlier this week in Miami, lived up to its reputation as the “all-star game” of financial advisor conferences, attracting top-level executives from throughout the investment industry. Here are three highlights from Tuesday’s sessions.
What drives advisor growth and profitability?
Bryce Skaff, co-head of the global client group at Dimensional Fund Advisors, presented the results of his firm’s research into the drivers of growth and profitability among advisory practices. Dimensional conducts an annual advisor benchmarking survey, collecting data about how much firms spent on key functions. It then divides the results to separate the high-growth and low-growth firms. (In his presentation, Bryce was clear not to equate growth with success. For example, he said it is not Dimensional's position to say that a lifestyle practice for a sole proprietor is any less successful than a supercharged enterprise firm. It aims to help all types advisors deliver on their individual goals.)
Of approximately 400 firms with more than $1 million in revenue, the bottom quartile grew revenue 2% versus 36% for top quartile on average. The number of households served, full-time employees and AUM were not very different. The data showed that high-growth firms spent more on human capital and the client experience than their low-growth counterparts. They spent about the same on business development and technology.
“Most firms use same technology,” Skaff said. But the successful firms “institutionalize” their use of technology, fully integrating it into their processes and workflows. Top-growth firms have a “culture of growth,” he said. They track sales growth, prospecting pipelines and even the number of digital “touches” they have with prospective clients. Those firms also offer more services, such as charitable giving advice, account aggregation and retirement planning.
Top-growing firms have younger clients in accumulation phase, Skaff said. They also raise fees more often in 2018, and are more deliberate about articulating their value proposition. Top firms attract a smaller percentage of new business from existing client referrals and more on scalable sources of marketing, such as digital prospecting, events and M&A. Top-growth firms acquired 12% of new clients through M&A. If you took a subset of the universe of just firms that have acquired any clients through M&A, 71% of the top-growth quartile new clients came from M&A.
“High-growth firms are not maximizing profits in the short term,” he said. “They are growing to improve their value delivery and improve outcomes for clients and employees.”