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July 14, 2017 at 04:33 AM
Despite challenges from the proliferation of robo-advisors and passive investment vehicles, the RIA business is growing at a fairly brisk pace. According to Schwab’s latest RIA Benchmarking Study, the median AUM for RIAs with $250 million or more in assets grew at a 10% compounded annual rate from 2012 through 2016, to $593 million from $358 million.
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During that same period, median revenues for those firms rose at a 9% compounded annual rate, to $3.49 million from $2.282 million, and the median number of their clients grew 5.2%, to 357 from 266.
The average client size also rose, to $1.8 million in 2016 from $1.6 million in 2015.
This data is based on self-reporting from 675 firms, with assets of $250 million or more, but the entire study uses data from 1,321 RIA firms, with assets ranging from $100 million to over $2.5 billion. Cumulative assets of the firms in the study totaled $848 billion.
The growth in assets among RIAs is especially good news because “decumulation [of assets] has started to take root,” says Jon Beatty, senior vice president, sales and relationship management at Schwab Advisor Services.
The asset growth among RIA firms reflects not only what firms are doing to retain and grow the number of clients but also gains in the market. The fastest growing firms, however, added more than twice as many assets from new clients compared with other firms: 9.4% vs. 3.9%.
Referrals from current clients and relationships with other professionals such as CPAs continue to be the dominant strategy for advisors to attract new clients, but marketing plays a key role too, especially for the fastest growing firms.
They leverage social media, have a “robust web presence,” host events in their communities and play a part in charitable organizations, according to Beatty.
