RIAs Must Track Client Acquisition Costs as Advisor Time Rises

Kitces Research found advisor time accounts for 71% of client acquisition costs for registered investment advisers. The analysis put CAC at roughly $1,064 for firms with under $250,000 in revenue and $10,408 for firms with more than $5 million.

The research reviewed RIA growth and expense data from 2017 through 2026. It reported average organic growth for RIAs fell to 3% from 9% over that period.

As advisory practices gain value and advisors earn higher compensation, more of the cost to win clients is tied to the time advisors spend courting and onboarding relationships rather than direct marketing spending.

Firms often undercount advisor time or fail to track the origin of leads, which skews CAC figures. Megan Carpenter, founder and CEO of Ficomm Partners, recommended firms set their own baseline CAC and test it against their channels, noting that benchmark figures from other firms can be misleading.

Joe Anthony, CEO of wealth-management marketing firm Gregory, recommended using client intake forms and website tracking to tie new relationships to specific marketing channels. He added that firms must keep consistent records to measure true acquisition costs.

The Kitces report warned that for many growing firms, the cost of acquiring new clients organically through advisor time and manual outreach can exceed the cost of buying growth through mergers and acquisitions. Authors Mark Tenenbaum and Sydney Squires wrote firms may reach a point where time-intensive tactics are no longer cost-effective.

Consultants point to referrals and centers of influence, such as certified public accountants, as lower-cost sources of new business that convert more reliably than paid ads. JT Gill, a digital strategy specialist at Ficomm, recommended calculating CAC by channel-referral, COI, events, social and paid-to identify where to reduce or increase spending.

Trey Prescott, director of business development at Advisory Services Network, noted client segmentation by lifetime value is influencing advisor recruiting and M&A activity and that firms must weigh acquisition costs against the revenue and tenure a client is likely to deliver.

Advisory and marketing consultants advised firms to include advisor and staff time in CAC calculations, break costs down by channel and compare acquisition costs to client lifetime value. Joe Anthony summarized the trade-off: ‘A great marketing plan isn’t a low customer acquisition cost. It’s a good return on the cost.’