LPL study: How advisors can triple revenue from $1M to $3M

How do some advisors bring in more revenue than others? Is it simply luck, or can their success be reproduced by others? 

It's the million-dollar question, or rather the $3 million question, that a new study from independent broker-dealer giant LPL Financial may have the answer to. The Aug. 17 white paper examines how the most productive 10% of advisors at LPL managed to generate on average around $3 million in annual revenue for their practice, compared with all other LPL advisors, whose practices brought in on average under $1 million. LPL, one of the industry's most aggressive recruiters, just had another record-setting quarter for advisor headcount — and the firm has attributed its recruiting prowess in part to its resources that support advisor growth.  

Read more: LPL developing 'a key tenet of our advisor experience,' CEO says

Despite making triple what their peers brought in, the top 10% of advisors in the study worked 49 hours per week on average — a difference of only two hours above the average of 47 that the other advisors logged. The difference is that those so-called "extraordinary advisors" worked smarter, not harder, according to Joe Lanser, the senior vice president of business solutions at LPL. 

"We were assuming that part of the way you would be an extraordinary advisor is, you would either have more years of experience, you'd be older, maybe you'd be in a more urban area. And you would work more," Lanser said in an interview. Yet those "extraordinary" advisors had no discernable difference in age or geographic locations from their more average peers.

LPL found several common practices that helped the top advisors in the study stand out and grow fast: They acted like a CEO and took ownership of their business with a long-term perspective in mind, optimized their time by delegating tasks and automating practices, used a clear mission statement and client criteria that they outlined in writing, and focused on offering comprehensive advice including in specialized areas — especially estate planning and tax, Lanser said. 

Top advisors also invested heavily in professional development and tech to stay cutting-edge in their offerings and demonstrated "resilience," the study said. A majority of them, 77%, said they had a trained staff member who could step in to take over for at least one other staff person in the event that someone on the team might leave — a key backup plan that ensures continuity of services for advisor teams, which tend to be small. 

Read more: Advisors offering education cost planning have faster "organic" growth, Dimensional study finds

They also had a larger emergency fund — on average, the top advisors had a six-month fund, compared with only four months for all other advisors. "Additionally, they are more likely to carry worker's compensation, commercial property coverage, and cyber/data breach insurances," the study said, adding that those insurances might not apply for all advisors, though. 

To act like a CEO, Lanser said, the top advisors in the study often had to accept the loss of personal control over every detail of their business as they got bigger. 

"They were wearing too many hats, doing too many different things, and they had to step back and identify: 'What am I really uniquely good at?' And then, 'What do I need from a team standpoint?'" Lanser said. 

He added that not only did those advisors strategically hire more staff for their team to fill in service gaps or take over tasks they were spending too much time on, but they also sought structured ways to keep staff motivated and engaged, such as by giving each worker an annual review and offering a publicly disclosed employee value proposition. This is especially valuable to help advisors develop staff with succession in mind, Lanser said. 

"Seventy-five percent of the top advisors formally evaluated staffing levels, roles, and individual performance every six months," the study said. 

"Firms are under extreme pressure to grow. So therefore, the advisors are under extreme pressure to grow. And they've got to grow not only each individual relationship, but they've got to grow more and more relationships," said Keith Bossey, a managing director at research firm J.D. Power, in a recent webinar event on how to satisfy advisors by helping them grow their business.

Read more: A guide to navigating the organic growth jungle 

Bossey added that firms that can deliver resources to help advisors with organic growth will be the ones that win the race for talent.