Registered investment advisor revenues improved over the past three years, but that growth may be vulnerable to market changes, a new study finds.
BNY Mellon’s Pershing Advisor Solutions released the results of the 2018 Study of Pricing & Profitability, which finds that RIA revenues have improved from 2015, the last time this study was conducted.
According to the study, the median revenue growth was 12%, up from 7% in the 2015 study. Meanwhile, operating profit margins remained consistent at 25%.
However, the study — which includes responses from 385 advisory firms — also finds that growth in assets under management is predominantly driven by market performance.
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“That the main growth driver for RIAs is the overall performance of the market should be a flag for our profession,” Gabriel Garcia, managing director and head of relationship management at BNY Mellon’s Pershing Advisor Solutions, said in a statement. “With the economy still running high, now is the time for firms to take a critical look at their business and identify areas of investment and improvement.”
According to the study, market performance beat out referrals or business development as a growth driver. Of the 19% increase in AUM across firms, market performance made up almost half of the growth at 8%. Meanwhile, business development efforts contributed to 5% of the growth.