Regardless of the size of a financial advisory firm, clients are a constant necessity to sustain a profitable business. And while some form of advertising is how firms have traditionally attracted clients, some advisors have asked if not actively marketing themselves can be a viable option, where new clients find their way to the advisor through a referral network who vouches for the good service they provide. Notably, while some businesses have achieved phenomenal success with little to no marketing efforts, is it realistic for financial advisors to anticipate success without promoting themselves, but by simply providing exceptional work for their clients?

In our 121st episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the importance for advisors to advertise their expertise, and whether focusing on providing exceptional work can be enough to attract and acquire clients to sustain a healthy and remunerative business.

As a starting point, there are unconventional marketing principles that can help advisors who do not want to engage in traditional marketing campaigns to effectively attract and acquire clients. For example, by getting very specific about the financial issues they can solve – whether they involve optimizing tax loss harvesting opportunities or helping professionals negotiate better salary and compensation agreements – advisors can establish credibility and build the trust that is essential in establishing a steady stream of referrals. Because if clients know from the start that an advisor has the knowledge and expertise to solve their specific financial problems, they will be more likely to engage with that advisor… and then to let others know about their positive experience.

Importantly, whether advisors choose to advertise themselves by using traditional marketing strategies or by focusing on more unconventional approaches, being very clear on how they can solve specific financial issues for their clients and delivering exceptional service to their ideal client can help them build a reputation that naturally attracts clients to engage with their services. And as advisors build a reputation based on their expertise, their visibility – and their chances of creating a robust stream of word-of-mouth referrals – will also grow.

Ultimately, advisors who can provide exceptional service to their clients don't necessarily need to promote themselves through commonly used avenues of advertising (e.g., creating social media content or using SEO tactics), because satisfied clients can be a powerful source of referrals, especially when their advisor has expertise in solving a very specific set of financial problems. And by projecting this message, an advisor's referral network can help the advisor maintain a profitable business without the advisor needing to spend any advertising dollars – all while attracting precisely the type of clients the advisor enjoys serving!

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A recent McKinsey report surveying growth in the wealth management industry predicted that the struggles of small RIA firms would increase as larger firms continue to grow and overshadow the industry... again. Although the messaging that smaller RIAs must scale to survive has been offered many times before over the past few decades, many smaller lifestyle firms and solo RIA practices have thrived in their preference to stay small. Yet, despite that many smaller firms have enjoyed success, scaling the business remain to be challenging prospects for those aiming to grow.

In our 120th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the challenges that small to mid-size RIAs face when trying to scale and grow and how the pressures of competing with larger firms can affect those endeavors.

Even when smaller RIAs didn’t have access to many of the resources that help advisory firms operate and grow decades ago, they were still successful because many of them learned how to leverage their relevance by intimately and impactfully understanding and addressing their clients' unique financial challenges. And for many firms, this specificity and relevance has been amplified by homing in on a particular client niche, allowing them to focus on very specific types of problems that their clients face. Yet, while cultivating impactful relationships with clients has always been a powerful means of maintaining a firm's relevance and success, many business owners are challenged with growing their firm, even with the boon of abundant technology and platform solutions available today that make it easier than ever before for small firms and solo advisors to be successful.

As while a business grows, there are more employees, clients, and operational logistics that come with growth that the firm must manage. And as these elements of growing a firm increase, problems also increase, and more solutions are inevitably needed to solve for those problems. Some firm owners believe the solution to address these problems is to add resources and grow further until they reach some attainable point they imagine where all their problems will become manageable and their growth can be capped, allowing them finally to maintain their firm at a comfortable equilibrium level. The reality is, though, that as a firm continues to grow, new problems will always arise and it is very rare for a firm to address with growth, to the extent that at some point they no longer need to grow! Which suggests that identifying a firm's expectations for success is what's most critical, as a firm who wants to stay small needs to define what success means to them in terms other than growth – whether that means they earn more revenue per client, develop a more focused niche, or enjoy a shorter workweek.

Ultimately, the key point is that despite surveys that may foreshadow the demise of the small lifestyle practice, small (and mid-size) RIAs are not going away anytime soon. Small firms who want to stay small can increase their success by finding more impactful and/or efficient ways to remain relevant to their clientele and provide meaningful financial planning services. And smaller firms who truly want to grow have more options than ever before that will help them succeed – from choosing the right platform, merging their business, or acquiring other businesses to help them grow and scale more efficiently and effectively. In the end, understanding which path to success a firm owner wants to pursue can help them decide whether scaling for growth is really the solution that will give them the best options for solving the issues they face today, or whether they need to remove themselves from the constant cycle of growth objectives and identify the real objectives that represent a successful future for the firm!

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