The Small RIA Firm Poverty Trap (and How to Escape)

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No doubt that being a financial advisor with a small amount of AUM is potentially an unenviable position to be in. Here are some marketing ideas – with a special focus on how financial advisors can get leads using LinkedIn messages – for how small RIA firms can get new clients and grow. Time to get out of the small RIA firm poverty trap

I’m here to tell you how to escape the small RIA firm poverty trap, y’all!

By the way, thanks for joining me.

For those of you who are new to my blog/podcast, my name is Sara. I am a CFA® charterholder and financial advisor marketing consultant. My weekly newsletter is about financial advisor lead generation topics, and it is best described as “fun and irreverent.” So please subscribe!

Sara Grillo, CFA is a highly fun and slightly crazy marketing consultant based in NYC.
I am an irreverent and fun marketing consultant for financial advisors.

So if you’re looking for some straight up talk then you’ve come to the right place!

Small RIA firm economics can often be…well…tough

The economics of being a Registered Investment Advisor (RIA) firm simply aren’t made to work for small operations with high overhead.

The results?


Many small RIA firms are mismanaged from a cost perspective because alot of advisors start their own firms, breaking away from a bigger one, without really thinking through how they are going to manage the business financially when they have to foot the whole bill. They struggle, are forever penny pinching, have run away costs, and can’t hire the quality of staff that they’d need to have in order to impress people with serious money. And then, when you least expect, the unforeseen happens. You didn’t see it coming and now you’ve got a mess to deal with.

  • You get hit with an audit and some exceptions come up. Now you’ve got attorney bills and the risk of going out of business, can’t focus on your clients and you’re running behind schedule every day.
  • The market dips and you lose 40% of AUM overnight. Now you can’t even pay your bills.
  • WannaCry virus hits and you didn’t update your firewall because your tech person is a novice 25 year old. You’ve got some explaining to do to clients.
  • Your top portfolio manager leaves and takes your three largest clients and because you didn’t sign a non compete agreement you can’t do anything about it. Now you’ve got to reassign accounts and cut back on the bonus pool this year.

So all this begs the question, how can a small RIA firm take care of its clients when so often it can’t even take care of itself financially? Ask most analysts at small RIA firms and they’ll say they’re happy with their level of responsibility but the pay is way lower than what they can — and will — get elsewhere after they pass their CFA® exams or get their MBA or get a few more years of portfolio track record. I knew one guy who was President of an RIA firm and he had to take two years with no salary just to avoid closing down his firm after the recession hit.

There is hope!

Hint: it has to do with your ability to use the internet to get wealthy clients. We will talk about that in a bit.

Is there strength in the Small RIA Firm Marketing Pitch?

So now that we’ve established that most small RIA firms operate in a poverty trap, what does this mean for clients?

Well first of all, why do clients work with small RIA firms rather than big ones? Most of the time it is a personality match. Most RIA firms haven’t built their brand through referrals and don’t actively pursue the cold market. In addition, referrals and personal networking are where business comes from, and the reason people say “yes” to a small RIA firm is likely the promise of better service or the comfort of knowing the person that they’ll be working with.

It makes me wonder if the elevator pitch all these RIA firms use is just that; a hollow marketing promise with no real justification behind it.

Sometimes yes, but alot of times no.

While small RIA firms tout customized, responsive service, are they really delivering on this promise? Do they really have the resources to deliver what a mid or large firm could in all possible circumstances?

It depends, actually. In recent years there has been a rise in advice only financial advisor firms, which focus on financial planning and advice without managing assets. I’ve seen some great examples of firms that are very well contained from a cost perspective, and they’re small – but the clients get a great experience and are very happy.

However, in many cases, small RIA firms stay small for a reason and usually it’s because they can only get small clients. The larger accounts ($10MM and above) are the ones you have to compete for. And I mean, compete with a capital C. It takes a tremendous amount of time, attention, focus, polish, branding, and customization to get through to these folks. Just one wrong word in a marketing pitch can blow the whole deal. Appearances matter and most small RIA firms look small and unsophisticated in the eyes of someone with serious money.Scaling Your Practice

So, sorry if I’m being too direct here. For all you small RIA firms, please hear me. This is the elephant in the room preventing you from scaling your practice.

Overcoming the size obstacle

Many people would be more inclined to work with a financial advisor that had $500MM or more if their account size were $20MM or above. Or $10MM, or $5MM. They’d want to see 20 years in the business and seasoned, deep staff resources. It would also be important to see top security to protect from risk of theft and misappropriation. That means everything, from encrypted email to making sure someone locks the file cabinets every night.

While this wouldn’t necessarily lead you to Morgan Stanley, it would rule out most small RIA firms in favor of any mid or large sized RIA firm. This is just based upon these simple needs. And although it’s changing rapidly, that’s why life stinks financially, many times, for small RIA firms.

Sound familiar?

There is one thing a small RIA firm or small financial advisor practice can do even if they have strained marketing resources – create a tight LinkedIn marketing strategy and a big  online brand.

The internet is the equalizer!

Small RIA firms can create a big brand through LinkedIn and LinkedIn Messages

There is way out of the Small RIA Firm Poverty Trap. Create a big concept that people associate you with. I’m not saying “fake it until you make it.” Exaggerating is going down the wrong path entirely. Lack of sincerity is exactly what created distrust of our industry in the first place.

Even small financial advisor firms can create a big brand on the Internet. It requires creativity and a laser like focus on what your unique strengths are. And then you apply it a million different ways in every presentation of your company. You’ve got to do it in a way that makes people attach to you emotionally.

Financial advisor marketing doesn’t have to cost a fortune. With the Internet as accessible as it is, marketing can be done relatively inexpensively using tools like LinkedIn. The financial advisor must create these messages with thought, sincerity, and purpose and that requires a commitment of attention. To learn more, read this blog about financial advisor LinkedIn messages and sequences.

Gone are the days of expensive paper mailers and marketing brochures. The currency of social credibility is how big you look on LinkedIn (which you can set up for free, by the way). Even if you’re the smallest RIA firm out there, if you have a big following online it signals value to people, rightfully or wrongfully. In their minds, people will figure out that there must be some good reason you’re getting all this attention. It will at least make them curious.

Now let’s say you follow that up with a really powerful brand that expresses your value as a financial advisor. How do you do that, by the way? Let’s talk about that next.

Small RIA Firm value proposition

But just getting on the Internet isn’t enough. You’ve got to get a nice, big brand online. Now, many RIA firms think brand doesn’t matter. They don’t even know what branding is and haven’t paid much attention to it. But this is the elephant in the room keeping you from where you want to be.

Here’s why.

Forgive me for sounding so brash, but I can’t convey this point without doing so bluntly.

99% of RIA Firms say the same thing in their marketing.

Or said differently:

99% of financial advisor marketing sounds the same.

It’s easy enough to prove my point. Just go to Google right now and type the search term “RIA firm” in your local area. You’ll see the first 5 firms that come up are saying the same things on their websites. I mean, it’s that obvious. They even use the same exact wording: “customized asset allocation”, “20 years in the business”, “fee only, independent advice”, “objective.”

Blah blah blah.

Get a killer value proposition and call it a day.

So how do you set yourself apart?

For some concrete examples of good and bad RIA firm branding, read this blog.

To bring back the example of me winning the lottery (which I must admit, is quite pleasant to think about!), let’s suppose that I came across an RIA firm on LinkedIn that had $50MM in AUM, but was specifically targeting New York City mothers.

  • Let’s say that they had several blogs on New York 529 plans and seemed to know everything about them.
  • Let’s say that they had a conference call on working mothers and how to make sure your kids can access your investment accounts if you were to pass away (how DO they get the passwords, anyways, especially if you were a single mom?).
  • Now let’s suppose that they have 10k followers on LinkedIn, were featured at a seminar as one of the top firms in the country in women’s finance, and their logo and tagline were female-oriented. Well, in that case I might just overlook the drawbacks of their small size.

Since they’ve branded themselves as a financial advisor targeting  female entrepreneurs who have children, there’s something about them that calls out to me.  See how brand matters? Certainly, it enlarges something of value to me. It stirs up my emotions, it makes me take a second look and focus on what they want me to see rather than what I want to see.

See my blog on LinkedIn posting tips.

Blowing Up Your Small RIA Firm Marketing Funnel

What’d ya think? Was this helpful?

If yes…

Learn what to say to prospects on social media messenger apps without sounding like a washing machine salesperson. This e-book contains 47 financial advisor LinkedIn messages, sequences, and scripts, and they are all two sentences or less.

This is a book about financial advisor LinkedIn messages which contains scripts you can use to get new prospects.

You could also consider my financial advisor social media membership which teaches financial advisors how to get new clients and leads from LinkedIn.

The Sara Grillo membership is a social media program for financial advisors - but only the cool ones.

Thanks for reading. I hope you’ll at least join my weekly newsletter about financial advisor lead generation.

See you in the next one!

-Sara G

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