Top 5 Growth Hacks from XYPN's 2024 Annual Benchmarking Study

As XYPN celebrates its 10th anniversary, we're also marking the 8th edition of our Annual Benchmarking Study. What began as a way to understand the growth of fee-for-service advisory firms has now become an essential resource for advisors navigating this evolving space.

Co-founder Michael Kitces reflects on the early days: "When we realized we were building a new business model—fee-for-service, subscriptions, and advice-only—much like the rise of AUM 20 years ago, it became clear we needed benchmarking to track our progress."

Alan Moore adds, “The goal was to help advisors set realistic expectations and see where they stand compared to others. It’s about knowing if you’re on track and identifying areas for improvement.”

This year’s study offers valuable insights into fee-for-service models' growth, helping new and established firms gauge their progress and adjust where needed.

During XYPN LIVE 2024, Michael and Alan discussed the study’s key takeaways in a special live XYPN Radio episode.

Listen to the episode here and explore the latest benchmarking data to see where you stand!

1. Understanding XYPN’s Average Revenue Growth Path

Figure 1: Average Revenue Growth Path

The Average Revenue Growth Path chart shown in Figure One above shows the typical revenue trajectory for advisors joining XYPN with little to no clients over a five-year period. It’s designed to help set realistic expectations about the early years of building a firm.

What the Chart Shows

• Year 1: High energy and excitement about starting the firm.
• Year 2: The "What did I do?" phase, when the challenges set in.
• Year 3: Things start to click, and advisors see early results.
• Year 4: The firm is working well, and advisors begin to stabilize.
• Year 5: A slight dip in growth as many advisors cap their client load after reaching their targets.

What About Survivorship Bias?

While some advisors do close their firms within the first two years (only about 5-6%), their exit doesn’t drastically alter the chart. The chart focuses on the growth path of those who stay in the business long enough to succeed. Also, keep in mind that the chart shows gross revenue, not net revenue (before expenses).

Key Takeaway

The first two years can be tough, but once you push through, you’ll start seeing the benefits. This chart helps set realistic expectations for new advisors—success takes time, but it’s possible with persistence.

2. The Impact of Niche on Revenue Growth

Figure 10: The Impact of Niche

Michael and Alan have been preaching the value of having a niche since the early days of XYPN. In their newly released second edition of the Monthly Subscription Model book, they now have data to back up what they’ve been saying all along: having a niche makes a real difference in revenue growth.

Three Phases: Launching, Building, and Scaling

The Impact of Niche chart in Figure 10 above tracks the revenue growth of XYPN members in 2023 who started with little to no clients. It divides the journey into three phases:

• Launching: 0-25 clients
• Building: 25-75 clients
• Scaling: 75+ clients

The chart compares niche firms to non-niche firms; the results are clear.

Niche Firms Outperform

In the past, niche firms usually started slower, catching up in the building phase and growing faster in scaling. However, in 2023, launching niche firms see 50% faster revenue growth in their first year than those who didn’t have a niche. This is a significant change. The reason? Many new niche advisors are already thinking about their niche and audience before they launch instead of figuring it out after starting. This prep work gives them a head start and helps them grow faster right from the beginning. 

Why Niche Makes a Difference

Niche firms have a clear focus and direction, which makes marketing and client acquisition much more efficient. With a defined target market, these firms know exactly what to do next, leading to faster growth.
The bottom line: having a niche doesn’t just help in the long run—it gives new firms a strong advantage from the start.

3. Revenue and Profit Per Engagement

Figure 4: Revenue and Profit Per Engagement

The Revenue and Profit Per Engagement chart in Figure Four above shows the growth in revenue and profit per client from 2016 to 2023. The light blue bars represent revenue and the dark blue bars represent operating profit.

Why Revenue and Profit Are Rising

In the early years, many advisors undercharge, but as they work with clients who accept higher fees, they raise their rates to match the value they provide. In 2016, fees were low because most members were new. By 2023, as more advisors are in the building and scaling phases, fee confidence has grown, and advisors are charging higher rates from the start.

Key Takeaway: Raise Your Fees Early

100% of respondents reported raising their fees within the first three months. The advice: start with a higher fee than you think you should because you'll likely need to double it later. Offering discounts is fine early on, but don’t stay discounted long-term—raise your fees to reflect the value you offer as your business grows.

4. Sources of New Clients: Niche vs. Non-Niche Firms

Table 1: Sources of New Clients For Firms With and Without a Niche Focus

The Sources of New Clients For Firms With and Without a Niche Focus in Table One above compares client sources for niche and non-niche firms. Niche firms see nearly 10% more clients from online/Google searches because they target specific, less competitive keywords. For example, a niche firm might target “financial advisor for architects,” making ranking in search results easier than general advisory firms.

Referrals from Centers of Influence

Non-niche firms get a higher percentage of clients from referrals. However, this doesn't mean niche firms aren't getting referrals—it just shows that niche firms are growing through different sources like SEO, which helps them attract more clients in new ways.

Key Takeaway

Niche firms are growing faster through specific channels like online searches, while non-niche firms rely more on referrals. Firms can tap into less competitive sources and see faster growth by focusing on a niche.

5. The Key to Scaling: Hiring the Right Team at the Right Time

Figure 17: Staffing Up

This Staffing Up chart in Figure 17 shows how firms staff their teams as they move through the launching, building, and scaling phases. In the launching phase, most firms operate with limited budgets and few clients, so they typically hire administrative support. As firms enter the building phase, staffing needs become more diverse, with many hiring contractors, virtual assistants, and outsourcing tasks like financial plan prep. When firms reach the scaling phase, they shift towards hiring advisor associates and delegating administrative tasks to them rather than continuing to outsource admin work.

The key takeaway is that, in the building phase, firms often need to delegate administrative tasks rather than meeting prep. Michael Kitces points out that many firms fall into the trap of holding onto tasks they should be delegating—just like a doctor who focuses only on patient care, allowing other staff to handle administrative duties. This shift is essential for scaling effectively.

Figure 18: Staffing Up

This Staffing Up (Employee V. Contractor) chart in Figure 18 shows the balance between direct employees and outsourced contractors as firms progress from launching to scaling. As firms grow, they create a more balanced team with a clearer hiring sequence. Many advisors begin by hiring an associate advisor, but what helps scale a firm is hiring an administrative assistant. This person takes care of the tasks the advisor doesn’t want to handle, freeing up the advisor’s time to focus on higher-value work.

Michael and Alan suggest using tools like the Working Genius test to identify strengths and weaknesses. This will help you know what to delegate and where to hire effectively, ensuring you don’t get bogged down by tasks that prevent you from growing your business.

Figure 25: The Cost of Scaling

The Cost of Scaling chart in Figure 25 examines revenue per advisor, a critical metric often overlooked. As a firm grows, advisors should delegate non-advisory tasks (like administrative work) to others, allowing them to focus on revenue-generating activities. However, this chart reveals an issue: as firms scale, revenue per advisor is declining instead of increasing, indicating that advisors are being given more administrative tasks rather than having them offloaded.

The takeaway is that many firms hire advisors but give them admin work instead of hiring administrative staff. This leads to inefficiencies, as advisors are not freed up to focus on client-facing work that generates revenue. A common mistake is hiring too quickly and outpacing the firm’s growth curve. Additionally, many firms still operate with the same fee structure they started, which isn’t sustainable as they scale.

Key Takeaway 

Across all three figures, the common thread is that as firms scale, they often make the mistake of hiring more advisors instead of the right support staff (like administrative assistants). This results in advisors taking on non-advisory tasks, reducing their revenue capacity. The key to scaling successfully is hiring the right people in the right order—start with support roles that free up your time to focus on clients and ensure your fees match the value you provide as you grow.

The insights shared in this year’s study highlight the growth and challenges that advisory firms face at every stage, from launching to scaling. Whether it’s understanding the impact of a niche, knowing when and how to staff up, or setting the right fee structure, these findings help advisors set realistic expectations as they launch and grow their firms. As Michael Kitces and Alan Moore have always emphasized, benchmarking isn’t just about comparison—it’s about empowering advisors to make informed decisions and continuously improve. Here’s to another decade of growth, innovation, and learning in fee-for-service advice.