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In the dynamic landscape of wealth management, the quest for sustainable growth has never been more challenging or crucial. Industry studies show that Many firms are struggling to create organic growth.
Fidelity’s 2023 Registered Investment Advisor (RIA) Benchmarking Study showed a precipitous drop in organic RIA growth from the five and six percent growth rates of 2019 and 2020 to 3.6 percent for firms over $1 billion in assets under management (AUM) and 3.2 percent for firms under $1 billion in AUM.1 The Schwab 2023 RIA Benchmarking Study showed this trend worsened, and it found that AUM decreased 7.1 percent for the median firm.2
This anemic and decreasing growth occurred over the same period when Statista reported a growth in the number of high-net-worth individuals in the United States from 6.3 million in 2019 to 7.4 million in 20213 and to 7.9 million in 2022. Most RIAs and wealth managers in general are quick to describe their target market as high-net-worth individuals. The increase in the HNW target market was 25.4 percent from 2019 to 2022.
Firms that experience decreasing revenue and slow growth in a growing market generally lack a well-defined focus on capturing market share through a strategic growth plan.
Growth minded wealth management firms need a long-term, forward-facing vision that serves as the foundation for a company-wide strategy. Enter the Chief Growth Officer (CGO), a role that has emerged as a pivotal force driving growth-focused wealth management firms toward significantly better success than their peers.
The evolution of the chief growth officer role
Traditionally, wealth management firms have relied on the expertise of chief marketing Officers (CMOs) to spearhead growth initiatives focused primarily on client acquisition and brand visibility. CMOs focus on developing the firm’s brand, promoting that brand in the marketplace, and measuring the results of the promotion efforts. They excel at creating awareness within the market of the firm.
Excellent CMOs can help the firm to define their ideal client persona (ICP). The ICP is a fictional representation of who your customer is and what you can provide them that is unique to your firm. Developing a detailed ICP enables you to draw a detailed picture of what your customers look like, creating a robust starting point for your marketing activity. CMOs will leverage that ICP and the firm’s unique value proposition to attract their ideal client to the firm.
CMOs generate the best leads using an ICP framework and marketing strategy that is designed to attract their ideal clients. These leads are called marketing qualified leads (MQL) in industries outside of wealth management. Marketing qualified leads are passed to a sales function to propose and close the business and generate revenue for the firm.
CGO versus CMO: understanding the difference
The distinction between a CGO and a CMO lies in the breadth and depth of their responsibilities. Where the CMO’s realm is traditionally marketing-centric, focusing on brand promotion and lead generation, the CGO’s horizon is far-reaching. A CGO’s strategy encompasses not just marketing, but also partnerships, market expansion, and customer lifecycle management, ensuring that every facet of the firm’s client interactions aligns with its growth objectives. This holistic approach enables wealth management firms to adapt more swiftly to market changes, seize new opportunities, and create enduring value for clients and stakeholders alike.
CGOs are not operations focused. Their role should understand the client onboarding experience and the interactions within that process with new clients. However, the chief operations officer (COO) should define, measure, and refine the operations processes.
The quintessential skills of a chief growth officer
Identifying the right candidate for the CGO position requires a keen understanding of the unique skill set that this role demands. Foremost among these is a strategic mindset, complemented by a profound understanding of the wealth management industry’s nuances. An effective CGO combines visionary leadership with analytical prowess and is capable of discerning patterns in market data to inform decision-making and strategy. Additionally, a strong CGO possesses exceptional communication skills, capable of fostering collaboration across the firm and rallying the team towards common goals. Creativity in problem-solving and adaptability in the face of evolving market dynamics are also indispensable qualities.
Firms that are considering a candidate for a chief growth officer should ensure that they understand marketing, sales, and client-facing operations within the wealth management industry. Firms should avoid candidates that have a deep focus in a single discipline without a broad exposure to each of the functional areas within the CGO role.
Why your wealth management firm needs a chief growth officer
The rationale for integrating a CGO into your firm’s executive team is compelling. In an era where client expectations are increasingly complex and personalized, having a dedicated executive to harmonize the firm’s growth strategy across all touchpoints enhances your ability to deliver superior value. A growth-minded firm needs a single individual that asks themselves every day how they plan to grow the firm.
A CGO ensures that your firm’s growth initiatives are agile, data-driven, and aligned with your long-term vision. By bridging the gap between market opportunities and operational capabilities, a CGO can steer your firm towards achieving its growth ambitions with precision and agility.
In conclusion, the role of a chief growth officer is not merely an addition to the executive suite but a strategic imperative for wealth management firms aspiring to thrive at a time when their peers are struggling. By championing innovation, fostering cross-functional collaboration, and driving a holistic growth strategy, a CGO can propel your firm towards achieving its growth targets and securing its competitive edge. As the wealth management industry continues to evolve, the vision and leadership of a CGO will undoubtedly become invaluable assets in navigating the path to sustainable growth.
John O’Connell, founder and chief executive officer for The Oasis Group, specializes in helping wealth management and technology firms solve their most complex challenges. His newest online training courses serve as a leading source of education for financial professionals at all levels in their careers. With modules ranging from cybersecurity to custodian markets and more, The Oasis Group enables firms and enterprises to upskill, learn at their own pace and rewatch lessons to reinforce specific learning objectives. Get an additional 20 percent off any course with coupon code ADVISORPERSPECTIVES.
1 https://clearingcustody.fidelity.com/comms/ria-benchmarking-program
2 https://content.schwab.com/web/retail/public/about-schwab/schwab_ria_benchmarking_study_2023_deck.pdf
3 https://www.statista.com/statistics/300464/us-high-net-worth-individuals/
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.