Advisors’ time becomes more valuable, and more costly, as practices grow.Iconic Prototype/iStockPhoto / Getty Images
Advisors assume their marketing costs will scale as their firm grows. But when accounting for advisors’ time, marketing expenses often have an anti-scaling effect that makes client and revenue acquisition pricier for the largest firms, according to a new study.
The latest report from U.S.-based financial planning site Kitces found that hard marketing costs, such as software and directory listing fees, do decline with scale: from 4.8 per cent of firm revenue for practices making less than US$250,000 in annual revenue to 1.4 per cent for firms that generate US$5-million or more.
But advisors’ time becomes more valuable as practices grow. The report found the cost of advisors’ time for marketing activities (calculated by using survey participants’ reported take-home pay and their estimate of how much time they spent on marketing efforts) increased significantly, from 2.5 per cent of revenue for the smallest practices to 7.1 per cent for the largest.
Accounting for advisors’ time when calculating firms’ marketing expenses could help explain the wave of mergers and acquisitions that have swept the industry in recent years.
According to Succession Resource Group’s 2025 review of advisor acquisition activity, 171 transactions representing more than US$14-billion in assets under management took place last year in the U.S.
Mark Tenenbaum, director of advisor research at Kitces, says if you only look at benchmarking numbers focused on hard marketing costs, “it almost seems irrational” to resort to M&A for client growth. But he argues large firms engaging in M&A at record rates aren’t acting irrationally at all.
“They experience those advisor time soft costs,” he says. “At a certain scale, if you don’t scale it effectively, marketing becomes no more efficient or, God forbid, less efficient than buying clients inorganically.”
Despite larger practices spending a higher share of their revenue on marketing, organic growth actually decreased by practice size, the report found.
The cost of acquiring clients also increased notably, from US$815 per client among the smallest practices to US$4,896 for practices making between US$1-million and US$2-million in annual revenue, to US$15,788 for the practices generating more than US$5-million a year.
Defying the trend
A segment of high-growth firms defied these trends, and Mr. Tenenbaum says advisors can learn from what they do well.
These practices, which achieved organic new-client revenue growth rates in the top third of their peers, relied less on advisors’ time in their marketing efforts, typically by delegating to staff.
Senior advisors at these firms also took less compensation than their peers, on average, and more of the firm’s net profits were reinvested into the firm and marketing to continue driving growth.
These practices are also more intentional about marketing, using at least three inputs – such as client surveys, industry research or hiring a consultant – to construct a marketing plan.
Furthermore, they rely on multiple marketing tactics, which often complement each other, such as hosting webinars or events and using social media posts to direct people to them.
High-growth firms also relied more heavily on certain types of marketing. Those in the smallest revenue category were more likely to use tactics that made it easier for prospective clients to find them, including search engine optimization, being listed in online advisory directories, and were more likely to increase their visibility with in-person networking and attending seminars.
Rapidly growing firms with more than US$1-million in assets were more likely to use events-based marketing, such as in-person seminars, webinars and client appreciation events.
High-growth practices were also less reliant on referrals from clients and centres of influence than other practices. While referrals can be very effective for building a business in the early stages, Mr. Tenenbaum points out that it’s a “passive strategy” that leaves advisors reliant on others to take action for them. After practices reach a certain size, the well of referrals will dry up.
“Firms heavily reliant on referrals experience persistent growth challenges over time,” he says.
The report also found that advisors are becoming more efficient in their marketing. Use of SEO and third-party review sites increased, while content-based marketing strategies such as newsletters, blogging, writing for third-party platforms, podcasts and book writing all declined.