Close Close

Practice Management > Building Your Business

Out With the New and In With the Old?

Your article was successfully shared with the contacts you provided.

Most investment advisors spend a lot of valuable time poring over revenue and profit figures. The process focuses much attention on the analysis of financial statements, budgets, business plans, etc. However, a critical and often overlooked aspect is whether larger sources of revenue come from existing clients or from new ones. Armed with a sound understanding of which client source drives bottom lines, investment advisors can make more informed decisions about where to focus their attention.

Firms devote a great deal of time and energy to finding and bringing in new clients. Within the vast majority of advisory practices today, it’s new client acquisition that seems to get the most attention and the lion’s share of almost any marketing budget.

For the third year in a row, advisors have a larger client base. With a 7% increase in 2006, the median number of clients jumped to 336.


Along with the growing number of clients, revenue also increased–up 18% for average firms and 31% for top firms (you may recall, top firms are based on the size of the firm, its profitability, growth rate, and range of services. Only 31 of 920 firms surveyed in 2006 were top firms.). Revenue growth was fueled significantly by existing clients–with revenue from those clients increasing 11% for the average firm and 27% for the top firms. The significant growth in revenues from existing clients may be underscoring the old marketing adage that holding on to the clients you’ve got is a more profitable exercise than seeking out new ones. Looking at asset growth, it’s clear that burgeoning assets from current clients are fueling advisors’ revenue growth. In 2006, AUM increased 15% for the average firm–with two-thirds of this growth (10%) attributed to existing clients. Top firms saw overall AUM jump 29% in 2006, with AUM from existing clients increasing a whopping 21%.


If the top firms’ success is any indication, bigger is better when it comes to clients. The industry’s top firms tend to focus on larger clients, which helps enhance their profitability. While advisors continue to serve broader client bases, greater success lies with bigger clients, not just more clients. The median account size at top firms is a healthy $1.38 million, more than three times that of the average firm’s median account of $422,619. Top firms serve substantially more ultra-high-net-worth investors than other firms.

As shown in the chart below, 47% of top firms’ clients are HNW investors with investable assets in excess of $1 million, compared to 7% by other firms. Top firms also serve more institutional clients (22% vs. 7%). Conversely, top firms virtually shy away from serving moderate and sub-moderate net worth investors (those with investable assets under $1 million and $500,000, respectively).


So while you certainly won’t stop bringing new clients in, consider the ways you can grow the clients you have. Your bottom line will thank you.

Maya Ivanova is a research analyst with Rydex, an affiliate of Rydex Investments. She can be reached at [email protected].

If you would like to receive any of the following research reports via e-mail, please contact [email protected].

The Advisor Confidence Index monthly release;

AdvisorBenchmarking’s Comprehensive Analysis of the RIA Marketplace Study;

AdvisorBenchmarking Media Exposure Series.

To receive a customized benchmarking analysis of your practice, visit the free online tool

AdvisorBenchmarking, Inc., an affiliate of Rydex Investments, is a research and analysis center focused on the RIA marketplace Through its web site,, the firm conducts multiple advisor surveys every year covering a host of business management and investment-management practices. The findings and analysis of the data are then released to the marketplace in the form of annual studies, quarterly research notes and monthly newsletters. The service is aimed at helping advisors grow and enhance their firms by comparing how their businesses fare against other advisors, as well as learning best practices of the most successful advisors.