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July 05, 2011 at 10:27 AM
Independent RIAs ended 2010 with record revenue and assets, according to a study released Tuesday by Charles Schwab. The 2011 RIA Benchmarking Study found that RIA firm revenue, fueled by strong asset growth in 2009, began to recover in 2010, with the median firm posting better than 18% growth after falling by 11% in 2009.
The study, which queried 820 firms with more than $300 billion in combined assets, also found that advisors ended 2010 on a note of rising confidence and optimism, as 87% of firms planned to grow moderately or aggressively in the coming year, with referrals from clients and business partners continuing to top the list of advisors’ growth strategies.
“Despite the worst recession in 80 years, advisors’ commitment to serving the needs of their clients and to adopting best practices in expense management has shaped a stronger RIA industry,” Bernie Clark, executive vice president and head of Charles Schwab Advisor Services, said in a statement. “As the RIA industry continues to recover, independent advisors are well placed to benefit from the strong foundations they built during the downturn, increasing their ability to weather future storms, and creating an underpinning of industry growth and momentum for years to come.”
RIA profits rebounded in 2010, according to the study, with most firms recording the highest year-end revenue and assets in the six years of the survey. The median firm in the study ended 2010 with $212 million AUM, compared with $176 million in 2007, before the market downturn. The median firm had $1.3 million in revenue in 2010, versus $1.2 million in 2008, the best previous performance.
As seen in last year’s study, advisors are focused on accelerating growth. Nearly two-thirds (63%) of RIAs placed growing their firm as their top business priority.Quality of service to clients was seen as the top enabler of growth. Adding new clients (80%) and new client business (77%) were also high on the list.Other growth enablers were:
- Delivering investment returns (70%)
- Implementing new technologies (69%)
- Maintaining efficient operations while adding new clients (63%)
Firms were also asked about obstacles to growth, and many they cited are familiar. Eighty-one percent reported at least one barrier to growth and 69% said such a barrier was related to marketing and business development. Many RIAs (52%) said they had trouble devoting enough staff time to business development.
One new barrier identified in this year’s survey is meeting and adapting to regulatory changes (21%). Additional top barriers to growth:
- Following a well-thought-out marketing strategy (39%)
- Identifying new prospects (34%)
- Sufficient financial investment in marketing (32%)
- Hiring talent (28%)
- Implementing long-term strategic plans (25%)
Firms reported that while revenue was up, the amount generated per client was still below 2007 levels. For that reason, efforts were made to keep costs down.
