An RIA firm looking to grow its business might consider establishing or fine-tuning its value proposition. That’s according to RIAs who participated in the 2016 Scottrade® Advisor Services Registered Investment Advisor Study.* When asked how they were planning to evolve their businesses in the next 3-5 years to stay competitive, 53 percent of RIAs who responded placed developing or improving their value proposition at the top of the list.
Many RIA firms say they already have a value proposition in place. The percentage increases with the size of the firm. According to the study, 56 percent of firms with assets under management (AUM) between $10 million and $100 million say they already have a written value proposition in place. Thirty-one percent said they have an unwritten value proposition. The numbers rise to 76 percent (written) and 16 percent (unwritten) for firms with AUM of over $500 million.
So – what are the elements of an effective value proposition? When asked to explain their value proposition in one sentence, 59 percent of RIAs who responded cited products and services such as financial planning, wealth/asset management, and investment/portfolio management. Twenty-four percent cited client service attributes such as good service and personalized service. Fifteen percent mentioned a firm’s brand or reputation, such as trustworthiness, experience and reliability.
Some of those choices might not be the best. For RIAs looking for guidance, an article published on the Advisor Perspectives website might help. The article, titled “Your Value Proposition: A Precursor to the Elevator Pitch,”** discusses how a true value proposition differs from a mission statement or vision statement. It should speak directly to an RIA’s target audience with a clear definition of what makes the business stand out.
The article suggests that listing hackneyed attributes such as delivering “great service” and “financial planning” are not the way to go. Instead, the article says an effective proposition should define in simple terms what problems a firm can help solve and how that firm’s approach differs from and is more valuable than those offered by competitors.
ActiFi, the practice management firm, discussed how RIAs might define a firm’s value proposition in a webinar presented to Scottrade® advisors titled “Define Your Differentiation.” To listen to a replay, log on to your Scottrade® Advisor Services home page, click on Advisor Services under the Resources tab, and proceed to the “Scottrade® Advisor Services Practice Management Webinar Series.”
A value proposition that is focused, thoughtful, and well-written may increase the likelihood that clients and centers-of-influence will be able to easily communicate the value of your business to others. This can be a relatively painless way to attract qualified prospects to your practice. In the 2016 Scottrade® survey, only 41 percent of firms said they believed at least three-quarters of their clients could explain their value proposition to other investors. In other words, there’s room for improvement!
*About the 2016 Scottrade® Advisor Services RIA Study
The 2016 Scottrade® Advisor Services RIA Study was conducted July 25-Aug. 9, 2016, in collaboration with Harris Poll, an independent third-party research firm not affiliated with Scottrade Financial Services, Inc., its business units or subsidiaries. The 303 Registered Investment Advisors were aged 18 and older and were employed at firms managing at least $10 million in assets under management.
This online survey was not based on a probability sample, and therefore, no estimate of theoretical sampling error can be calculated. For more on the 2016 Scottrade® Advisor Services RIA Study, visit the Scottrade® Advisor Services RIA Study site at https://about.scottrade.com/media/research-findings/advisor-services-study.html.
The information and content provided is for informational and/or educational purposes only. The information presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its affiliates to buy, sell or hold any security or other financial product, or an endorsement or affirmation of any specific investment strategy.