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.
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.
What Your Peers Are Reading
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.