The Importance of Marketing for RIAs
Marketing plays a crucial role in the success of registered investment advisory (RIA) firms, especially when it comes to organic growth. A recent study conducted by Catchlight, a financial advisor lead generation and conversion firm, revealed that the largest RIAs show wide disparities in marketing practices. The study focused on 18 RIAs with at least $1 billion in client assets, highlighting the significant impact of marketing investment and execution on their growth.
According to the study, RIAs that invest more in marketing are experiencing organic growth, while others are relying on mergers and acquisitions (M&A) deals to expand their assets under management. This finding underscores the importance of strategic marketing efforts in attracting new clients and driving business growth.
The Evolution of Marketing for RIAs
Experts like Marie Swift, CEO of Impact Communications, have observed a disparity in marketing investment among RIA firms, with some allocating minimal resources to marketing activities. However, there is a growing recognition among RIAs of the need to invest in marketing as a strategic growth driver.
As the industry evolves, RIAs are beginning to shift their approach to marketing, moving away from traditional methods towards a more data-driven and strategic approach. This shift involves building specialized marketing teams, leveraging technology tools, and focusing on long-term content strategies to differentiate themselves in a competitive marketplace.
Strategies for Organic Growth
The Catchlight study identified four levels of marketing investment among RIAs, with levels 3 and 4 showing positive organic growth. These levels are characterized by a shift in perspective, with marketing being viewed as a growth function rather than a cost center.
RIAs that are focused on organic growth are investing 5% or more of their projected revenue in marketing, staffing up their teams, and leveraging technology tools to enhance their marketing efforts. By calculating metrics such as client acquisition cost and lifetime value, these firms are able to optimize their marketing strategies and drive sustainable growth.
The Role of Private Equity in Marketing
Private equity firms have played a significant role in driving marketing transformation within RIAs. By providing strategic guidance and investment, private equity partners are pushing RIAs to prioritize AUM growth, revenue, and profitability. This shift in focus has led to a more data-driven and outcome-based approach to marketing.
RIAs that embrace this shift are reaping the benefits of increased organic growth and long-term enterprise value. By allocating resources towards marketing, investing in technology, and collaborating with external experts, these firms are positioning themselves for success in a competitive market.
Conclusion
In conclusion, the Catchlight study highlights the critical role that marketing plays in driving organic growth for RIAs. By investing in marketing, building specialized teams, and adopting a data-driven approach, RIAs can differentiate themselves, attract new clients, and achieve sustainable growth in a rapidly evolving industry.
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