As the industry logs record-high profits alongside anemic organic growth, it’s time to ask whether firms have permanently lost their business development muscle.
AUG 07, 2026
By John Lefferts
I’ve been involved in several start-ups in my career, one launching a B/D and RIA from scratch with PE funding and another fintech firm funded by wealthy investors. At both, there were several strategic pivots and every day was like your hair was on fire. You aren’t thinking about next month, let alone next year. There may not even be a tomorrow.
The CEO of the fintech firm put it to me this way, “You can’t think long term or even short term. You have to focus on one single thing each and every day … don’t die”.
This sounds very primal and even Darwinian. But you survive to fight another day, and then another, and another. Then you string together days, months and even years of survival until you finally “make it”.
Understandably, not everyone has the personality make-up and mind-set to deal with this uncertainty. You have to think single-mindedly about growth. And in the wealth management business, growth comes in two forms: organic through business development/recruiting, and inorganic through mergers and acquisitions.
There was an article in InvestmentNews recently titled Advisory firms are hitting record profits – but their organic growth engine is stalling. While profit margins are climbing organic growth came in at a record low at 3.7%. It also cites that many RIAs don’t incentivize advisors financially for winning new business. In other words, they have adopted a passive “clock in-clock out” employee mindset in maintenance mode at a time where industry trends point to the greatest opportunity for organic growth in the history of the industry.
Let that sink in for a moment. Record profits and record-low organic growth, at the same time. That isn’t a growth engine stalling. That’s a business quietly deciding to stop being a business. Strip out market appreciation and 3.7% barely covers the natural decay built into every book: clients retire and decumulate, clients pass away, assets move to the kids’ advisor.
A firm posting record margins on stagnant organic growth isn’t building enterprise value. It’s harvesting it. The most recent Cerulli study on organic growth found that RIAs allocate an average of just 5% of total expenses to marketing activities, and only 14% of RIAs use a dedicated marketing resource. … Yikes!
And if you suspect those are just survey numbers from firms willing to answer a survey, the public record now says the same thing. The new RIA Signals Report from Paithos Research read the SEC Form ADV filings of every registered adviser that filed in both of the last two annual seasons – over 14,000 firms, no survey, no self-selection.
The findings should stop every industry leader cold: the median RIA grew assets 14.5% in fiscal 2025, a year the S&P 500 returned 17.9%, and added exactly one net new client. Nearly half of all firms (44.6%) ended the year with the same number of clients or fewer, and 30.5% grew assets without adding a single one. The market did the heavy lifting, and the firms cashed the check.
I’ve spent four decades in this business on both sides of the model, leading career (W-2) channels and independent (1099) channels, and here’s what that experience taught me: The employee mindset sees clients as accounts assigned to it. It asks, “What’s my salary and payout?” It waits for growth to show up, from firm-provided leads, from referrals that wander in, from market performance quietly doing the heavy lifting. When something goes wrong, it looks up the org chart: compliance is too slow, the technology is bad, the grid changed. And it manages quarter to quarter, thinking short-term without a vision for the long term.
The entrepreneurial mindset sees the book as an owned asset with enterprise value. It asks, “What’s my P&L?” and it will gladly take home less this year to build capacity that compounds; staff, technology, a niche, a marketing engine. It treats prospecting as a permanent discipline, not a phase you graduate from once the book gets comfortable. When something goes wrong, it owns the outcome. And it manages toward a ten-year vision of the practice: capacity, continuity, succession, and what the business will be worth to someone else someday.
One mindset thinks in terms of gross compensation. The other thinks in terms of valuation multiples. That single difference drives nearly everything else.
The old career agency system that I grew up in at Equitable, for all its flaws, manufactured entrepreneurs. When I came up in the business, you learned to prospect or you starved. As a manager we often said, “recruit or die”. It was Darwinian in exactly the way that start-up CEO described – survive today, then string the days together.
The industry’s shift to recurring fee revenue was unquestionably good for clients and good for stability, but it carried an unintended side effect: It made it possible to stop growing without feeling any pain. When the market hands you fee revenue whether or not you win a single new client, the urgency drains out of the room. The hard-traveled trail becomes a hammock.
The Paithos data puts hard numbers on that hammock: the median firm’s reported assets per advisory employee jumped from $98.6 million to $108.5 million in a single year while clients per employee didn’t budge, and 56.7% of firms grew assets on a flat or shrinking advisory headcount. Revenue up, effort flat. And tellingly, the smallest firms in the study had the best asset year and the worst client year – median client growth of exactly zero.
The business development/prospecting muscle needs to be developed and kept in shape or it risks deteriorating into atrophy potentially to be lost forever. There is real evidence that the business development muscles for many of the RIA’s today are wasting away in a stage of atrophy.
Which brings me back to the most damning finding in that InvestmentNews piece: many of these firms don’t financially reward advisors for winning new business at all.
Comp design manufactures mindset. My old boss at AXA Financial, Kip Condron, was famous for saying “Compensation drives all behavior”. If the plan pays the same for servicing inherited assets as it does for landing new ones, you will get a firm full of servicers, and you’ll deserve it. You get what you pay for, literally. I’ve run turnarounds and I’ve run start-ups, and in both cases the first lever I look at is the same: Does the money follow the behavior we say we want? In most firms with a growth problem, it doesn’t.
The Paithos filings data shows what the firms that actually behave differently look like. Firms that grew their client rosters at least 10% last year grew assets three times as fast as the flat-or-down cohort (24.7% versus 7.9% at the median). They were twice as likely to use client testimonials in their advertising and meaningfully more likely to pay for referrals. It’s a correlation, not proof of cause, but it’s exactly the pattern you’d predict: the firms doing the entrepreneurial work are getting entrepreneurial results. Meanwhile, four filing seasons after the SEC’s Marketing Rule made testimonials fair game, barely one firm in nine reports using them. The tools are sitting on the table, and mostly the growers are picking them up. Entrepreneurial firms aren’t just growing – they’re steadily taking share from the comfortable ones.
For firm leaders serious about fixing this, the playbook isn’t complicated, but it does require will. Pay meaningfully for net new assets, not just total production. Make business development a trained, managed, and inspected discipline rather than a slogan at the national conference. Measure organic growth net of market movement so beta can never mask stagnation. Put real ownership economics – equity, succession paths, enterprise value participation – in front of your next generation, because nothing converts an employee mindset faster than actually owning something. And recruit and promote for the entrepreneurial trait itself, because it’s far easier to teach a hungry advisor your platform than to teach a comfortable one hunger.
That start-up CEO’s mantra, “don’t die,” was the right one for the moment, because in a start-up, death is imminent and survival is the whole strategy. In an established advisory firm, the danger is precisely the opposite: Nothing feels imminent. Margins are fat, markets are up, and revenue arrives on schedule whether you earned it this year or ten years ago.
But a firm growing organically at 3.7% % – an industry whose median member added one net client in a year when the market handed it 14.5% asset growth – isn’t surviving. It’s dying comfortably.
The entrepreneurial mindset knows the difference between being profitable and being alive, and it understands that in this business, growth isn’t a department or an initiative. Growth is the business. Everything else is servicing the past.
John Lefferts is a former president & CEO of AXA Advisors (now Equitable Advisors), former president & CEO of Lion Street Financial, and, most recently, head of Cetera Investors. He is a 2025 inductee of the FINSECA Management Hall of Fame.
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