Better Managed? More Productive

Schwab Institutional conducted its second comprehensive advisor benchmarking study this year, RIA Benchmarking: Growth Trends Study, which included financial and organizational data from more than 1,500 advisors managing $425 billion in assets. Dave Welling, VP of marketing and advisor business management of Schwab Institutional, notes that the Study confirms the healthy growth of the RIA industry. The overall industry is growing at a pace “north of 20% in terms of assets; with revenues tracking pretty close” to that percentage, he says, and some firms are growing “40% to 50% a year, even big $1 billion firms,” though by contrast, some RIA firms “don’t want to grow.” But those that do choose to grow face a similar barrier: “They simply can’t hire people fast enough to serve the opportunity that’s coming at them. When we talk to advisors in person, it’s people and systems: the infrastructure, the technology that they put in place. They don’t need to linearly add back-office staff as they’re adding clients.”

What about profitability, though? “We see it improving,” says Welling, noting that the median profitability in the Schwab study is between 22% and 25%–that’s operating profit, post-partner compensation–depending on the peer group.

As an expert observer at the roundtable of the six top advisors, Welling had some comments of note.

On the people issue: