In the constantly evolving registered investment advisor (RIA) and wealth management landscape, the importance of a well-crafted strategic plan reveals itself in measurable results. According to Schwab’s 2020 RIA Benchmarking Study, 75% of the Top-Performing Firms have a written strategic plan.1,2
For RIAs, whether on the consulting or investment banking side, alignment across all aspects of a firm creates growth, longevity and increased enterprise value. The track records of top firms demonstrate that a strategic plan isn’t just a document—it’s a blueprint for sustained growth and long-term success.
As firms grow, the complexities of scaling operations, maintaining client satisfaction, and staying ahead of market trends demand a proactive approach to planning. So, where should you begin in building a strategic plan for your firm?
Begin with the End in Mind
If you’ve heard me speak, you’ve probably heard me reference Stephen Covey’s principle of ‘starting with the end in mind’ as it relates to RIA firms. The reason for this approach is simple: if you aren’t able to clearly define where you want your firm to go and what you’re building, it will be nearly impossible to make the right decisions year over year. What do you want your firm to become? Who do you want to serve? Establishing these foundational objectives will guide every decision and action that follows.
If anything, you, and your team should be able to clearly define the following:
- Vision: What are you aiming to build—a local niche practice, a regional multi-office organization, a lifestyle practice, or a true operating organization?
- Mission: What core values and standards do you want your firm to uphold? How do you want to be perceived by clients and the broader market?
- Value and Clientele: To whom are you delivering services? What segment of the market are you targeting? Is there a specific niche?
Establish a Baseline and Understand Where You Are Today
Before charting a course forward, it’s essential to understand where your firm currently stands. For most MarshBerry clients, a SWOT analysis across 12 value drivers for a wealth/RIA business is recommended. Establishing this baseline not only provides a reference point for future comparison, but it also often highlights key areas of focus for the business. At a minimum, the core components of this baseline assessment should include the following: Market Positioning, Financial Health and Revenue Streams and Benchmark Versus Your Peers.
Market Positioning
As Jack Welch famously said, “There are only two sources of competitive advantage: the ability to learn more about our customers faster than the competition and the ability to turn that learning into action faster than the competition.” For RIAs, in a world with increasingly scaled competition and expanding service offerings (read: “compressing margins”) this means deeply understanding your target market and aligning your value proposition to meet their specific set of needs and address their pain points.
- Target Market: Who are you serving, and what do you provide them?
- Service Model: Does your business model allow you to profitably serve this clientele?
- Differentiators: What sets your firm apart? Is it service and quality, specialized knowledge, niche expertise, depth of service or something else?
Your positioning has a significant impact on your organic growth potential and referral power. Strategic market positioning can pave the way for your firm’s long-term growth and success.
Financial Health and Revenue Streams
While managing purely to maximize financials is rarely recommended, a business with a weak financial position has minimal operating leverage. Leverage proper expense management systems (ex: QuickBooks) so that you can quickly access clean financial data, including income statements and balance sheets, while integrating data feeds to gain accurate insights into your client base. Breakdowns should include:
- Revenue Categories: Classify revenue by source, such as planning fees, asset management fees or other revenue streams.
- Expense Categories: Categorize expenses accurately to allow for future benchmarking and alignment with industry standards. Define expenses as fixed or variable/contingent to better manage financial planning.
Benchmark Versus Your Peers
Benchmarking your firm’s performance against industry standards provides valuable insights. Analyzing metrics such as AUM (Assets Under Management) growth, revenue per advisor, EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization) margins and client retention rates can help you set realistic performance targets and identify best practices that can be adopted to drive growth.
Outline Your Goals
Your plan should be a combination of long-term goals in line with your vision for the firm, with short-term objectives (one- and three-year) that build to this and comprise the actionable plan. These should be SMART goals—Specific, Measurable, Achievable, Relevant and Time-bound.
Examples of strategic goals might include:
- Financial Goals: Increase AUM by 20% over the next 12 months through a combination of organic growth and strategic acquisitions.
- Growth and Client Acquisition Goals: Boost new client acquisition by 50% in the next quarter by implementing a targeted digital marketing campaign and enhancing referral programs.
- Long-Term Goals: Identify specific milestones, such as establishing an equity distribution program or establishing a human capital strategy for the organization.
Continuously Track and Refine Your Plan
A strategic plan is not static. It must evolve as your firm grows and the market changes. Regularly review your progress against established goals and make necessary adjustments to stay on track.
- Tracking Alignment: Implement systems for tracking key performance indicators (KPIs) that align with your strategic objectives.
- Updating the Plan: Schedule regular reviews— typically this is done annually—to reassess your strategic plan. This allows you to refine your approach, pivot where needed, and ensure that your firm is always moving toward its long-term objectives.
- Identifying Misalignment: One of the most critical steps in your strategic planning process is identifying where your firm’s current position diverges from your desired future state. Areas to focus on include:
- Client Segmentation: Are you serving the right clients? Do your current clients align with your long-term goals?
- Ownership and Equity: Consider the long-term independence of your firm. Is your ownership structure conducive to generating next-generation leaders and owners, or is there a need for equity restructuring?
- Growth Targets: Are your growth goals realistic? For example, is it feasible to grow from $1 billion to $3 billion in AUM within five years?
Building a strategic plan for your firm can ensure that your firm is well-positioned to thrive in the competitive wealth advisory space, ensuring long-term success, sustainable growth and optionality for ownership.
Thought Leadership Events
At a MarshBerry event, the outcomes are just as important as the experience. Attendees leave with the most advanced data, cutting-edge insights, new relationships, and key takeaways that will help them innovate their businesses. Join other insurance agencies and brokerage executives, along with MarshBerry advisors, at a MarshBerry event to explore strategies that will help you lead your firm to growth and profitability and learn how to maximize shareholder value.
