When financial advisors are growing their practice, you’ll often hear them refer to reaching a threshold of where they want to be, “I want to hit $100 million, “ or, “My goal is to be at $500 million, “ or the lofty, “I want to be a $1 billion practice.”

But what number are they actually referring to:  market value, revenue, profit, assets under management (AUM), assets under advisement (AUA)? It ‘s hard to hit a goal—and build a team that’s on board to support you—that isn’t clearly defined and clear to everyone pursuing it.

In the business world, typically a “billion dollar business” refers to market value or revenue. Given a typical market valuation standard of 5 to 7x revenue, a “$1B business” could have anywhere from $200 million in revenue (5x $200M = market value of a billion dollars) to $1 billion in revenue (actual revenue of a billion dollars).

However, in the financial services world, we often measure the size of a wealth management business by the assets under management.  Or sometimes assets under advisement. But also potentially by market value….clearly, we’re not all speaking the same language all the time.

So when we talk about a “$1B practice” at Carson Group, here is exactly what we mean:

$1B Practice =  $1B of Discretionary Advisory Assets

Why does that seemingly arbitrary number matter? Why do we feel setting a goal to become a “$1B practice” is important? A billion dollars in discretionary advisory assets is important for an independent financial advisor because at this size you have built processes and technology that allow you to scale easily, have a team to support those processes, have a plan for continued growth and have a business that can stand on its own to compete with any other advisor for any type of client.

At this size, you have built an entity that can succeed you and continue in your absence. You have shifted your role from advisor to CEO and are running a business instead of a lifestyle practice.

Let’s look at some of the key attributes of billion dollar wealth management firms.

Characteristics of $1 billion firms:

  • Define their practices differently; reaching $1 billion was not a conscious goal
  • Focus on client satisfaction above all else
  • Never allow operational concerns to get in the way of client service
  • Created a business out of their practice, catching the market trend early and creating equity for themselves.
  • Serve clients using a team approach, with no one advisor handling all aspects of any single account or household.
  • Well-designed hierarchy of service that allows each team member’s talents to be used to its best capacity
  • Staffing, technology and growth decisions are made in terms of client service, not primarily in terms of profitability

So we can see how a $1B practice is different from smaller firms and why becoming one is an important marker in the growth of your firm. But if you are sitting at $25 million, $100 million or even $500 million in assets today, $1 billion is a long way off. It’s almost impossibly far off. But that’s ok. I have good news for you.

“The steps needed to get to a $1B practice are just as valid and effective to get you from $25M to $200M or $100M to $500M.”

The steps needed to get to a $1B practice are just as valid and effective to get you from $25M to $200M or $100M to $500M. But you have to make the decision to set a target, start pursuing that goal and then back it up with the actions that will get you moving there. Are you ready to get started? We want to support you!

We want to help you become a CEO, not just an Advisor or Business Owner, and work ON your business instead of IN your business.

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