RIAs’ Revenue, Assets Rebounded Last Year: Schwab Benchmarking Study

Operational discipline helped maintain service while protecting revenue

Independent RIAs ended 2010 with record revenue and assets, according to a study released Tuesday by Charles Schwab. The 2011 RIA Benchmarking Study found that RIA firm revenue, fueled by strong asset growth in 2009, began to recover in 2010, with the median firm posting better than 18% growth after falling by 11% in 2009.

The study, which queried 820 firms with more than $300 billion in combined assets, also found that advisors ended 2010 on a note of rising confidence and optimism, as 87% of firms planned to grow moderately or aggressively in the coming year, with referrals from clients and business partners continuing to top the list of advisors’ growth strategies.

“Despite the worst recession in 80 years, advisors’ commitment to serving the needs of their clients and to adopting best practices in expense management has shaped a stronger RIA industry,” Bernie Clark, executive vice president and head of Charles Schwab Advisor Services, said in a statement. “As the RIA industry continues to recover, independent advisors are well placed to benefit from the strong foundations they built during the downturn, increasing their ability to weather future storms, and creating an underpinning of industry growth and momentum for years to come.”

RIA profits rebounded in 2010, according to the study, with most firms recording the highest year-end revenue and assets in the six years of the survey. The median firm in the study ended 2010 with $212 million AUM, compared with $176 million in 2007, before the market downturn. The median firm had $1.3 million in revenue in 2010, versus $1.2 million in 2008, the best previous performance.

As seen in last year’s study, advisors are focused on accelerating growth. Nearly two-thirds (63%) of RIAs placed growing their firm as their top business priority.Quality of service to clients was seen as the top enabler of growth. Adding new clients (80%) and new client business (77%) were also high on the list.Other growth enablers were:

  • Delivering investment returns (70%)
  • Implementing new technologies (69%)
  •  Maintaining efficient operations while adding new clients (63%)

Firms were also asked about obstacles to growth, and many they cited are familiar. Eighty-one percent reported at least one barrier to growth and 69% said such a barrier was related to marketing and business development. Many RIAs (52%) said they had trouble devoting enough staff time to business development.


One new barrier identified in this year’s survey is meeting and adapting to regulatory changes (21%). Additional top barriers to growth:

  • Following a well-thought-out marketing strategy (39%)
  • Identifying new prospects (34%)
  • Sufficient financial investment in marketing (32%)
  • Hiring talent (28%)
  • Implementing long-term strategic plans (25%)

Firms reported that while revenue was up, the amount generated per client was still below 2007 levels. For that reason, efforts were made to keep costs down.

At $7,300 revenue per client for the median firm, revenue was up from 2009 ($6,900), but down 13% from a 2007 high.

The average RIA firm cut staffing costs to 62% of revenue in 2010 from 65% a year earlier. The top areas of cost-savings as a percentage of revenue were nonowner professional staff compensation, owner compensation, benefits, and payroll tax and rent.

According to the study, RIA firms are using outsourcing and adopting technology systems to increase productivity. RIAs reported a more than 40% increase over 2009 in the outsourcing of in-house, back-office operational functions such as data management, performance reporting and. Small and midsize firms might have the most to gain from this tactic because internal expertise could be difficult or expensive to develop.

The greatest technology growth of the past three years has been in trade-order management and rebalancing software (66% increase), client websites (61% increase) and document management (35% increase). Investing in new technology is a top-3 priority for nearly one-quarter of firms.Throughout the financial crisis, RIAs provided clients with close attention and frequent communication, a tactic that built client loyalty. The study found that on average, RIAs slowed client attrition by 25% compared with the previous year, holding on to 97% of their clients during 2010.

Firms also grew their client bases by 4.4% in 2010 versus 3% in 2009, though this remains below the 8% median annual growth rate of the client base from 2003 to 2006. Client referrals continue to be a top initiative for advisors, with 54% stating it as a top three strategic initiative for 2011.Schwab said strategic planning, a new component of this year’s study, is a crucial element of business development. While nearly two-thirds of firms said they go through a strategic planning or priorities process, only 42% had a written strategic plan.

Moreover, 40% of RIAs do not have a succession plan in place. Those that do have a plan tend to be larger firms.

“With many advisors 50 years of age or older, having a plan in place for succession can instill confidence among employees and clients,” Clark said in the statement. “Planning what will happen to a business once it stops being an advisor’s full-time job is a critical business practice.”

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