WSR CEO Larry Roth sat down with John Wernz, Entrepreneur-in-Residence at Great Hill Partners, to discuss the paradox of slowing of organic growth while our industry continues to see high inorganic growth.
To start the conversation, Roth pointed out that many firms achieving high inorganic growth through acquisitions in recent years have lost the ability to grow organically.
Wernz agreed, noting that many firm budgets set in 2022 didn’t budget enough for organic growth, which led to challenges in 2023. “That’s probably what led to those results that we all saw.”
“It’s not as easy as jumping on a platform and then all of a sudden raining organic growth down,” Wernz added. “While inorganic was running crazy, I’m not sure that helped organic growth rates and may have even stifled it a little bit.”
Responding to Roth’s request for examples, Wernz replied that “Some of these bigger firms – they top out. … Some of these larger firms are starting to find that ceiling, that when they cross $50 billion, $100 billion in assets, it is really hard to keep that organic growth rate at the same pace.”
“Can the firms do something to continue to grow once they get that large?” asked Roth.
Wernz answered that there will always be more marketing or customer acquisition channels to explore.
“You can’t slow that budget off of 2022 and then expect to be ready for ’23 and ’24. You’ve slowed your growth rate,” he added.
Addressing whether any firms in the industry had “topped out,” Wernz stated, “When you look at people like people I worked with in the past – like Fisher and Wealth Enhancement Group – there’s still a lot of runway, but it only comes with consistent investment against that runway.”
James Miller, Contributing Editor and Research Analyst at Wealth Solutions Report, can be reached at ContributingEd@wealthsolutionsreport.com.
