An Expert Perspective on Investment Advisory Growth

Most independent investment advisors want to grow their businesses. It can be hard, however, to know which growth strategy can provide the greatest competitive advantage. Our Vice President of Strategic Markets, Susie McEuen, recently interviewed a powerhouse in the independent investment advising world, David Bahnsen, on our OnPoint podcast.

Bahnsen shared his insights on organic versus inorganic growth, developing a growth mindset, and how he built a firm with over $6 billion in assets under management, along with several other topics in this wide-ranging interview.

→ Watch Now: OnPoint Podcast featuring David Bahnsen

Getting to know David Bahnsen

Founder, Managing Partner, and Chief Investment Officer of The Bahnsen Group (TBG), David L. Bahnsen started his investment advisory career in the wire house world at PaineWebber (now part of UBS) followed by several years at Morgan Stanley. In 2015, he started The Bahnsen Group and in the past nine years has grown the company into a firm managing over $6 billion in client assets.

A prolific author of books, industry articles, and podcasts, Bahnsen has also been a guest on CNBC, National Review podcasts, Bloomberg Radio, and numerous other media outlets.

Growing organically versus inorganically

Bahnsen says TBG’s growth strategy has primarily focused on organic growth. While the company purchased a book of business from a single independent advisor – a transaction that went well for all parties – acquisitions have not been the firm’s main source of growth. Rather, TBG has worked on building a media presence that drives leads, which are then developed by a team of customer-centric advisors.

An important takeaway from Bahnsen’s sole acquisition is this: make sure the target’s clients are a good fit for the acquiring company. “We hear so much about the compatibility of the professionals involved in a transaction, … but we have to be particularly conscientious to make sure that the clients fit with who we are and what we're doing,” he says.

Having a growth mindset

At the heart of TBG’s success has been a growth mindset across the organization. “It used to be that we really wanted to bring in $50 million a month of new business totally organically, … but it's now gotten up to $80 to $100 million a month has become our new aspiration,” he says.

Bahnsen went on to say growth brings with it not only the need for more people to service clients, but also the need to provide a wider range of services for those clients. They have a full tax department and provide “soup to nuts” tax preparation and strategy for clients, for example.

Putting the right hats on the right people

With this pace of growth, it’s crucial not only to have enough people, but to have the right people in the right positions. TBG has made division of labor a key element of its success. Bahnsen explained he used to have responsibility for 150 clients day to day, but now that is down to about 25 because he focuses more on the content-production strategy for business to drive new leads. He still meets with clients every day, but he may drop in for 15 to 20 minutes of a longer meeting rather than running the whole meeting himself. With Bahnsen freed up to concentrate his efforts on brand ambassadorship and content creation, TBG has pushed its compounded annual growth rate (CAGR) to 29.2% per year.

This “democratizing” of efforts, as Bahnsen calls it, allows team members to focus on the areas where they do their best work.

Finding talent

TBG has more than 70 employees spread over nine locations across the country. Bahnsen credits the geographic diversity of their offices as one of the keys to finding good talent. By not limiting themselves to New York or Southern California, TBG can recruit and hire talent in many different areas.

As an example, he described setting up their branch in Nashville, Tennessee, with only an office and a sign on the wall but staffed by a talented and motivated advisor. The company added operations staff, a planner, and an equity analyst, and now that office has brought in over $400 million in its first two and a half years. Bahnsen pointed out that setting up that office was a risk, but it was one that led to substantial growth.

Discovering your secret sauce

Every investment practice is different, and the path to growth isn’t the same across the board. For some, growing through merger and acquisition (M&A) is the approach that best fits with the company’s culture and objectives. Others may focus on bringing on more talent, or specialized advisors, to drive growth.

Bahnsen recommends growth-minded advisors keep their eyes open for what it is they are good at, “a realization that you maybe couldn't have seen or couldn't have known, but once you do see and once you do know, you have to grab a hold of it. You have to capitalize on it, really take advantage of a certain strength or opportunity that comes your way.”

For Bahnsen, the “homegrown strength” he recognized was his ability to create content - books, podcasts, articles, appearances, etc. – and the impact content has on the business. Being all-in on omnichannel communications has established Bahnsen and his company as leaders in the independent investment advising industry. These efforts expose potential clients across the country to TBG, driving consistent organic growth. Connecting those prospects with advisors who have top-notch people skills and advising expertise solidifies the client relationship.

Making hay when the sun doesn’t shine

A final piece of advice Bahnsen shared was TBG’s approach to down markets. “We view challenging markets as a golden opportunity to gather assets because … we're providing all sorts of perspective and value and commentary and touch and communication all the time, and during bad markets a lot of advisors are not. I think prospecting becomes like shooting fish in a barrel during difficult markets.”

Planning for growth

Whatever a firm’s route to growth, financing is likely to be part of the picture. Specialty lenders like Oak Street Funding who understand the RIA business model can serve as ideal partners in taking a firm to the next level.