The wealth management industry has experienced impressive growth in assets under management (AUM) over the past decade, but much of that growth has been inorganic.
According to Boston Consulting Group’s (BCG) annual global wealth report, rising market values, acquisitions, and advisor hiring have driven the majority of AUM increases, leaving organic growth as a persistent challenge for many firms.
The Struggle for Organic Growth
BCG’s report reveals that organic growth—defined as net new assets generated by existing advisors within a firm—accounted for only 28% of global AUM growth over the last decade. In North America, this figure drops to 22%, on par with growth attributed to hiring. Market appreciation, meanwhile, represented nearly half (49%) of AUM growth in the region.
Firms have relied heavily on recruiting experienced advisors and acquiring their established client books. "Many firms grew by recruiting experienced advisors and onboarding their existing client books, effectively buying growth from competitors," the report states. However, this strategy comes with diminishing returns as client portability declines.
Barriers to Organic Growth
Several factors are hindering organic growth, particularly in mature markets like the U.S.:
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Advisor Motivation: Many advisors manage large books of business and earn significant compensation based on overall portfolio performance rather than incremental client acquisition. This structure offers little incentive to pursue new relationships actively.
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Compliance Overload: Increasing regulatory demands leave advisors bogged down with administrative tasks such as documentation, suitability checks, and internal reporting. These obligations reduce the time available for prospecting and cultivating new business.
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Generational Disconnect: Advisors frequently struggle to engage younger generations of their clients' families. While wealth managers often discuss the importance of "next-gen" clients, few have succeeded in building trust early with these digital natives, who prioritize transparency, autonomy, and personalized offerings.
Challenges in Inorganic Growth
The once-reliable strategy of recruiting experienced advisors is no longer the straightforward win it used to be. Wealth management executives interviewed for the report noted that the costs of onboarding new advisors have risen significantly. Meanwhile, improved client retention programs mean fewer assets transfer with advisors when they change firms.
“These days, when we recruit an advisor from a competitor, we’re lucky to attract 20% to 30% of their client book,” one executive explained. “The days of seamless asset portability are long gone.”
What Sets Organic Growth Leaders Apart?
Despite these challenges, some firms are excelling at organic growth by focusing on key differentiators:
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Strong Branding: Successful firms prioritize building a strong brand that goes beyond a name and logo. Effective branding involves cultivating a clear identity and values that resonate with both clients and advisors.
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Generative AI for Prospecting: Wealth managers leading in organic growth are leveraging generative AI to refine their prospecting efforts. These advanced tools analyze external data to create detailed client profiles, including business owners, expats, and high-income professionals. AI algorithms can identify digital signals that suggest investible wealth, such as business sale filings, job changes, luxury travel activity, or niche interests like car forums.
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Engaging the Next Generation: To retain generational wealth, forward-thinking firms are engaging heirs early. Advisors are encouraged to see clients' adult children as active participants in the financial world—entrepreneurs, investors, and consumers of advice—rather than passive future inheritors.
Tailored experiences that combine human insight with digital tools can help establish relevance and trust with younger generations well before wealth transfer occurs.
Leveraging Technology for Growth
Technology is increasingly becoming a game-changer in addressing growth challenges. Firms adopting generative AI tools gain a significant edge by automating prospecting tasks and identifying high-value leads more efficiently. For instance, tracking digital signals like luxury purchases or niche market activity can uncover opportunities that traditional methods might miss.
Moreover, digital tools offer a way to connect with next-gen clients, who expect seamless, technology-driven interactions. By integrating AI with human advisory expertise, wealth managers can deliver personalized experiences that align with the preferences and expectations of younger investors.
Overcoming Client Retention Challenges
Retaining client assets across generations remains a critical obstacle. Advisors must move beyond treating heirs as secondary stakeholders and instead engage them as key decision-makers. Building trust requires understanding their unique goals and priorities, which often differ from those of their parents.
BCG suggests that firms design services and experiences specifically for younger clients, blending digital platforms with personal interactions to create meaningful engagement. Advisors should consider educational initiatives, networking opportunities, and customized financial planning tools that resonate with this demographic.
A Balanced Path Forward
The BCG report underscores that achieving sustainable growth in today’s wealth management landscape requires a dual focus on organic and inorganic strategies. While market appreciation and recruiting will continue to play a role, firms must adapt to the changing dynamics by investing in technology, strengthening their brands, and forging connections with the next generation of investors.
Wealth advisors and RIAs have an opportunity to lead this transformation by embracing innovation and rethinking traditional growth approaches. By addressing the barriers to organic growth and leveraging tools like generative AI, advisors can better position themselves to thrive in an increasingly competitive market.
