Specialization: The Secret Sauce for RIA Growth
The Growth Puzzle
For emerging RIAs, finding the right growth strategy can be difficult. Large RIAs tend to capture the lion’s share of market growth, and plotting a path to success can be hard for smaller firms.
One proven answer to the growth puzzle is specialization (see Figure 1).
Charles Schwab. 2021 RIA Benchmarking Study. 2022.
8 Benefits of Specialization
By focusing on specific areas of expertise, RIAs can set themselves apart from their competition, enhance their service offerings, build a strong reputation, and establish long-term relationships with clients.
Specialization—and particularly building a team offering a range of specialized services—offers many benefits, including:
- Faster Growth: By targeting specific fast-growing niches such as pre-retirement Baby Boomers or retirement income planning services, RIAs can boost their growth.
- Greater Sustainability: Diversifying across different client demographics helps RIAs build a more sustainable and resilient business.
- Better Client Service: By specializing, RIAs can develop a comprehensive suite of tailored services, which can help them meet the diverse needs of their clients (see Figure 2).
- More Lucrative Clients: High-net-worth clients demand an array of specialized financial planning services, and RIAs that do not offer them will not attract these highly desirable clients.
- Diverse fee structure options: Offering a range of specialized services enables RIAs to diversify their fee structures – they can potentially capture both fees-for-service and AUM fees, or even introduce tiered subscription models.
- Greater Client Retention and Referrals: Specialized services help RIAs deliver better results for clients, and this can lead to increased “stickiness” – it enhances the probability that clients will look to you first when requiring (or recommending) specialized advice.
- Easier Recruiting, Better Retention: Experienced advisors with specialized knowledge may view specialized RIAs as an opportunity for partnership, while promising young advisors may look at your firm as an ideal place to gain experience, develop a specialization, and stay for years.
- Better Ability to Differentiate: In a crowded marketplace, specializing allows RIAs to stand out from the competition.
Spectrem Group. Wealthy Investor Series: Wealth Management Redefined. 7/2021
Perhaps even more importantly, specialization can help RIAs meet client expectations for excellence, deep knowledge, and detailed, actionable strategic insights.
To learn more about how specialization can boost RIA profitability and growth, visit our RIA Resource Center now.
More From The College:
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See our CFP® Certification Education Program.
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Look inside our CLU® Program.
Six Steps to Build an Ensemble Team
Assembling the Team
An ensemble team can support your RIA’s growth and success by enabling you to deliver the specialized services that clients demand. But building an ensemble team can be a complex process.
Fortunately, these step-by-step guidelines can help.
- Determine the areas of specialization you want to target with your current client base, as well as which areas you might want to target in the future.
- Conduct an audit to see which areas of specialization can be handled internally by expanding the expertise of a current employee and which need to be recruited into the firm.
- Locate the required specialists either through your professional network or educational resources such as The American College of Financial Services, which has more than 180,000 alumni.
- Build your team with minimal specialization overlap—but keep in mind that, if there is significant demand in one area, you may need multiple people with specialization in that area.
- Emphasize characteristics in your candidates that are ideal for team chemistry, such as professionalism, communication skills, ethics, accountability, and a commitment to ongoing education.
- Clearly outline the role of each team member, provide a sound management structure, and explicitly define all financial arrangements.
To learn more about how specialization can support your RIA’s growth and success, visit our RIA Resource Center now.