This month’s issue of Practice Edge is the first of a three-part series that will closely examine the best practices of RIA firms as revealed through AdvisorBenchmarking.com’s latest survey of 655 RIA firms. Based on the Top Firms benchmark–a composite made up of 23 firms that have met our stringent performance criteria–we draw a comparison between the most successful RIA firms and the rest of the marketplace. Perhaps the most obvious result of that success is that the top firms can boast of a staggering 11.29% growth in assets last year, compared to a decline of 6.58% for the average RIA firm.

In part 1 of this series, we specifically examine the staff operations and services of top firms in relation to other firms, highlighting the drivers of success in each of those areas.

Staff Structure

Top firms employ a median of 12 associates, comprising three principals, four specialists supported by three client service staff members, and two administrative personnel. By contrast, the average RIA firm employs eight individuals with two employees for each of the four categories described.

The larger staff of top firms is not the only driver of success. The higher ratio of professionals, including both principals and specialists, in relation to non-professional staff (client-services/administration), is undoubtedly responsible for the firm’s superior ability to serve clients well. Top firms have 1.4 professionals for every single non-professional employee, compared to the average firm, which has an even ratio (1:1) of professional to non-professional employees.

Spending Time Wisely

As shown in the chart below, principals at top firms are able to spend more time serving clients (55.10% of time vs. 30.84%) due to the overall larger staff at their firms. Top firms’ principals also allocate more time to work on the firm’s business strategy (16.42% vs. 10.37%). This efficient dedication of resources and talent is inarguably critical to the firm’s success, especially when you consider that principals at the average firm spend 13.56% of their time on administrative tasks.

Source: AdvisorBenchmarking.com, Sample of 655 RIA firms.

Range of Services

With a total of seven professionals (three principals and four specialists), top firms are able to offer a median of five services, compared to three by the average firms. Specifically, the most common services offered by the top firms are investment management, financial planning, estate planning, advanced tax planning, and insurance planning. Many of the top firms also offer more advanced services, such as executive compensation consulting and charitable giving planning. This wide array of services is a clear indication of the robust presence of wealth management services among top firms.

In all, successful firms have a very structured staff comprising seven professionals supported by five administrative employees. The firms’ principals spend more of their time on client relations and business strategy and less on portfolio management and administrative duties. Top firms also offer as many as five wealth management services, ranging from financial planning to philanthropy planning.

In the next issue of Practice Edge, we will feature the best practices of top firms in the areas of marketing and client relations. Stay tuned!

To receive a copy of AdvisorBenchmarking’s 2003 Comprehensive Analysis of the RIA Marketplace Study, please e-mail Ramy Shaalan at rshaalan@advisorbenchmarking.com.

To receive a customized benchmarking analysis report of your practice, visit the free online tool www.AdvisorBenchmarking.com

AdvisorBenchmarking.com is a free online resource of research and analysis on the RIA marketplace. The service is aimed at helping advisors grow and enhance their practices. By participating in the online surveys, advisors can see how their businesses fare against other advisors, as well as learn best practices based on the most successful advisors in the business. The instant analysis they receive offers valuable insight that can help them take their practices to the next level and weather the challenging market conditions.