This two-part series of Practice Edge provides a synopsis of the financial performance of independent advisors in 2003 based on AdvisorBenchmarking’s May survey of 1,095 RIA firms. In this issue, we discuss the growth in assets under management those advisors have seen, as well as the changes in revenues and the revenue mix. In part two next month, we shed more light on profit margins and the notable new trends in clientele and client management.
Assets Under Management
If assets under management (AUM) were the only measure of success, 2003 had to be one of the best years for independent advisors since we began tracking the industry’s performance five years ago. Following steep declines in the previous three years, advisors saw their AUM rebound by nearly 23% from 2002 levels to $87 million on median at the end of 2003.
At this asset level, advisory firms on average manage exactly the same amount of money today as they did in 1999 when the stock market was at an all-time high, as shown in chart 1 below. While flat asset growth in a four-year span hardly seems a cause for celebration, one must not forget that the S&P 500 Index was down 19.58% over the same period. There is even more encouraging news: With 24% asset growth in 2003, the three-year asset decline between 2000 and 2002 was effectively reversed in a single year, demonstrating the industry’s ability to recoup losses fast when bolstered by a strong stock market.