Independent registered investment advisors have reached a place of strength and confidence, according to a new study released on Monday from Charles Schwab.
The 2015 RIA Benchmarking Study shows that RIA firms’ revenue and profitability have reached all-time highs.
“It really is a time of abundance for the RIA industry,”said Jon Beatty, senior vice president of sales and relationship management for Schwab Advisor Services, during a visit to ThinkAdvisor’s New York office.
The 9th annual RIA Benchmarking Study, which contains self-reported data from 1,007 firms that custody their assets with Schwab and represent nearly three-quarters of a trillion dollars in assets under management, found that nearly half (42%) of the participating firms have doubled their revenue since 2009.
In addition, according to the study, more than half of participating firms have grown their assets by at least 75% in the last five years – representing a compound annual growth rate (CAGR) of 12.1%.
Along with AUM growth, the study found that profitability — measured as standardized operating margin — has risen 36% over the last five years and now stands at 27% for the median firm in the study.
“We know that some of that [success] has to do with the market and the performance in the bull market,” Beatty told ThinkAdvisor. “But, really where we find reassurance around the success is in the client acquisition statistics.”
Over the past five years, the number of new clients has surged by more than 24% for half of the study participants.
The study found that top-performing firms grew their client base by 10% in 2014, while the median firm added 5%.
“In all peer groups, advisors are having success in acquiring clients,” Beatty said, adding that “the best performing firms in the study in the past five years have almost doubled the number of clients that they serve.”
RIAs are also taking on larger clients, the study finds.
“In all peer groups, [RIAs] are going upmarket in terms of the size of household they serve,” Beatty told ThinkAdvisor.
According to the study, the average account size is now $1.9 million — $3.9 million among the top-performing firms.