As the data often shows, strong organic client growth can be difficult for registered investment advisors. Without it, a practice can get stifled, particularly during market downturns when revenue from assets under management is eroded.
According to practicing RIAs and consultants, market downturns that strain assets can also be an opportunity to attract clients.
“In times of market volatility and economic uncertainty, it can be a great opportunity to gain new clients,” said Alvin Carlos, financial planner and managing partner with District Capital Management in Washington, DC. “When the stock market is booming, people feel confident they can invest independently. But when the stock market tanks and there are rumors of a recession, people wonder what the best course of action is.”
When markets drop, fiduciary advisors can show their value, Carlos said. He was recently invited to speak to an audience in their 50s and 60s worried about the stock market crash and a recession next month.
“Being out there talking to your community or publishing a timely blog can help an advisor gain credibility and attract potential clients,” he said.
As always, the devil is in the details, and running a practice during market volatility can also require more effort than during a bull run.
“You definitely have to work harder,” said Kimberly Foss, a senior wealth advisor with Mercer Advisors based in Roseville, California. “You have to be available for clients. My philosophy is that if one client texts me with a worry, that’s probably five other people with the same concern.”
During the current market unrest, Foss said she has been calling, texting, and emailing clients and sending them a weekly update. That type of communication, she said, creates loyalty among her current clients but also leads to referrals from people who may not be satisfied with how their advisors are handling the moment.
“This is the opportunity for us to plant the seed,” she said. “I’m not trying to take advantage of fear. I want to empower the client to tell them that they are okay, that it’s going to be okay, but let’s look at the portfolio to get a second opinion to see if there are gaps there that I can help with.”
Catching Cold
Philip Palaveev, CEO of RIA consulting firm Ensemble Practice, equated financial advisement to a medical practice.
“People don’t go to the doctor until they have a sneeze,” he said. “And now, the whole country is sneezing.”
Paleveev cited a recent Ensemble survey of more than 1,000 investors that showed that a recession is the second most common reason for seeking an advisor after receiving an inheritance.
While the U.S. is not in recession, recent market volatility and significant financial and political figures’ discussions of an economic downturn make this a moment for advisors to “start planting seeds now” to attract new clients, Palaveev said.
“The industry’s growth has always come in waves,” he said. “Recovery from recessions is a guaranteed surfing opportunity—the tide lifts all boats. But the firms who set up for growth now and are able to take on clients in the aftermath are the firms who will grow.”
Joseph Conroy, financial advisor at Harford Retirement Planners in Bel Air, Maryland, said via email that opportunities to gain clients in down markets often start by taking “care of existing clients first.”
“Clients can be the biggest advocates for your practice, and it’s important to be there for them when they need you most,” he said. “That also confirms you are the right advisor and they’ll be more likely to offer referrals to their peers who might not have the same guidance or confidence in uncertain times.”
It’s also a time for advisors to reconnect with prospective clients that “they have met over the years that for one reason or another never become clients.”
The challenge comes in being active with new client engagement and making sure existing clients are happy, or, as he puts it, playing both “defense and offense.”
“We need to keep our existing clients calm and pointed in the right direction while also proactively marketing our practices,” he said. “The game just got twice as hard as when the market drops, it also affects advisor’s income.”
He equated an advisor doubling down on efforts during uncertain times to market investing itself.
“Just like how we preach to buy the market dips, the effort we put into client acquisition during market turmoil typically yields future returns that could separate an advisor from the rest of their peers,” he said.
A study by Ensemble and BlackRock found that RIAs saw new client assets under management grow at an average rate of 7.5% in 2023, far below the 10-15% Ensemble targets as a sign of a strong practice.
Cerulli Associates, a Boston-based consultancy, found that from 2019 to 2023, the average RIA’s compound annual growth rate for those under $1 billion was about 2%, not including market growth. For a $1 billion firm, it was about 3%.
Goal-Based Advising
According to Stephen Caruso, associate director in Cerulli’s wealth management practice, the consultancy preaches that “any time can be a good time for client growth.” In market volatility, RIAs may find clients more interested in financial planning services than in beating the markets.
“The data we’re seeing right now is that 75% of investors reported that their primary portfolio goal is to be protected from significant losses compared to just 24% of retail investors who want to outperform the market,” Caruso said.
The consultant said many investors today seek a “goals-based” approach to advisement, focusing on buying homes, paying for weddings and other life moments. Advisors who do not provide those financial planning services “may see some attrition” after times of market volatility.
“As we shift more broadly to planning-focused advice, if [RIAs] are not doing it currently, this kind of market volatility could be the next event that causes you to think about for your practice,” he said.
Filip Telibasa, owner and planner at Benzina Wealth, a Sarasota-Fl.-based firm, was skeptical of volatility as a driver of client interaction. In his view, acting on market concerns is less common than responding to life events.
“Most times, there are other events specific to each particular client that act as the catalyst for reaching out to a planner,” Telibasa said via email. “For example, starting a family, buying a house, switching jobs (that now includes equity compensation), and other life events.”
He noted that, in today’s market, clients or potential clients usually understand that markets go up and down and that an advisor does not have a “magic solution” to solve for volatility.
“Instead, the true value in partnering with a planner is that they can act as a quarterback for all things money touches,” he said. “Said differently, clients understand planners take a comprehensive approach instead of looking at investments alone. I believe this is a win-win, and everyone benefits as we can help with more components of a client’s life.”
When it comes to growth channels, Ensemble Practice’s research shows that 25% of investors start searching for an advisor from friends and family. That is followed by brand recognition at 12%, independent online research at 11%, and seeking advice from a CPA at 11%.
Todd Rabold, investment management partner at Callan Family Office, said moments of volatility can provide opportunities for client referrals and that the firm is actively communicating with “our network of COIs, prospects and clients, providing our thoughts on the current environment and what opportunities may be available in the coming months.”
In market drops, Rabold said Callan will focus with clients on tax loss harvesting to mitigate future tax liabilities, along with other financial planning strategies that “could make sense at these lower levels.”
Meanwhile, consistent communication with clients is key.
“We regularly review cash needs and strategic asset allocation targets and discuss the risks and opportunities of the current market,” he said. “Periods of volatility can be uncomfortable for investors, particularly if their advisor is not reaching out to discuss what this means for their financial situation.”
