Independent advisory firms posted their highest profit margins in a decade last year, yet a new study suggests that financial success may be masking a deeper structural weakness. The Ensemble Practice's 2026 True Ensemble Growth and Profitability study, based on 2025 calendar-year data from 173 advisory firms, found that the average operating profit margin reached 38.6%. However, true organic growth—defined as new client relationships net of market appreciation—stood at only 3.7%, near the lowest level recorded in the firm's ten-year benchmarking history.
"On average, we saw an operating profit margin of 38.6%. Very healthy profit margins. I don't know many firms that would turn down that opportunity," said Catherine Williams, chief operating officer at Ensemble Practice, in an interview. "But when we looked correspondingly at true organic growth ... we absolutely saw a difference in that new client growth."
The pattern is not new but has become more pronounced. In 2015, the average firm reported a 24% profit margin; by 2025, that figure climbed to 38.6%. Over the same period, new-client growth trended downward. Ensemble Practice's data shows an R-squared of 47.7% between a firm's profitability in one year and its organic growth the next—a relationship Williams described as a "scissoring" effect that has persisted across multiple years of the study.
"If you consider profitability to be the intersection of operational efficiency and growth, and you're only paying attention to one of those two things, it could become a problem in the future," Williams said. "When we see that divergence happening, that's what really caused us to sit up and take notice."
The report segments results by firm size—under $500 million, $500 million to $1 billion, $1 billion to $3 billion, and super-ensembles above $3 billion—as well as by growth pace, to identify where complacency is most prevalent. Williams pointed to three recurring factors behind the divergence: underinvestment, compensation design, and capacity constraints.
Highly profitable firms tend not to reinvest profits into business development or advisor sales skills, she said. Marketing spend averages just 3% to 4% of revenue across the industry, according to other studies, while Ensemble Practice's own survey found independent firms allocating only 2.3% of revenue to marketing staff and spend combined. Additionally, many firms still do not financially incentivize advisors for winning new business, a practice Williams defended. "It is absolutely okay to reward advisors for bringing in new business," she said. "It does not kill your culture."
Capacity issues also play a role. Advisors at highly profitable firms often report lacking bandwidth to prospect because they are stretched thin serving existing clients. Williams argued that firms need to build teams, technology, and processes for the size they aspire to, not the size they are today. "You can sort of hide behind the numbers a little bit, especially when the market's great," she said. "But if you're doing those things in absence of pursuing organic growth ... your ability to hide behind that goes away once markets or deal flow cool off."
Ensemble Practice's methodology defines true organic growth narrowly—new client relationships, net of market appreciation—deliberately excluding gains from existing-client contributions, M&A activity, and market performance. This distinction matters most when markets are strong or a firm has recently closed an acquisition, conditions that can mask a lack of underlying new-client growth. Williams recounted a conversation with a $3 billion firm whose leadership admitted, "we don't know how we got here."
For firms eyeing internal succession or outside capital partners, a clear account of growth sources is essential. The study underscores that while high profitability is attractive, it may come at the cost of future growth if not balanced with investment in new client acquisition. Related research from AssetMark and other studies reinforces that operational discipline alone does not guarantee sustained growth.
