“Good times, bad times, advisors have proven that their business model is all-weather.”
That’s what Jonathan Beatty, senior vice president of sales and relationship management at Schwab Advisor Services, likes to say about the proven track record of independent financial advisory firms.
According to results from Schwab’s 2016 RIA Benchmarking Study, independent financial advisory firms reported that they have maintained a 10-year growth trajectory despite numerous and varied investment environments.
For the past 10 years, Schwab has conducted the study, the largest of its kind focused exclusively on RIAs. The results of the 2016 study of 1,128 firms representing nearly three-quarters of a trillion dollars in AUM was released on Friday. The 2016 study reflects RIAs’ experiences in 2015.
“We know ’15 was not a great year for the market,” Beatty said during a visit to ThinkAdvisor’s New York office. “It was a mostly sideways market in 2015, and there was certainly some volatility along the way there.”
Despite the recent sideways market, advisors are still delivering a compelling value proposition to clients that’s illustrated in firms’ growth, according to Beatty.
Over the past year, study results show that the growth trajectory for firms’ AUM and revenues eased somewhat but remained positive. AUM rose to $588 million in 2015 from $365 million in 2011, at a median compound annual growth rate (CAGR) of 9.2%, and revenues grew to $3.6 million in 2015 from $2.3 million in 2011, at a CAGR of 10.9%.
The study finds that the advisor-client relationships are a bedrock of firms’ strength and resilience, and have been central to driving this growth during tumultuous market environments.
“When we looked at the study we saw again tremendous retention rates at 97%,” Beatty said. “I think that’s the fifth year in a row that they’ve been in the high 90s in terms of retention. And a proof point that they are providing a strong value proposition to their clients and have spent maybe more time getting clients through this period.”