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RIAs Focusing on Organic Growth

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An overwhelming majority (80 percent) of firms said gaining new clients through business and existing client referrals was their top strategy to spur growth this year, according to the more than 1,100 advisory firms that participated in Schwab’s 2014 RIA Benchmarking Study.

“There’s a relentless focus on growth,” says Jonathan Beatty, senior vice president of sales and relationship management for Schwab Advisor Services. In addition to focusing on referrals, 39 percent of firms cited enhancing strategic planning and execution as their top strategy, while 28 percent planned to use segmentation to move the needle.

Only one in four firms have plans to acquire another firm, though Beatty says about 13 percent of firms who have made strategic acquisitions have seen success. But now more than ever, there’s more of a focus on institutionalizing the business and strategic planning Beatty says. According to the study, more than 61 percent of firms put a strategic plan in place (up from 52 percent in 2012) and 49 percent have put a formalized succession plan in place (up from 44 percent in 2012).

“We see a compelling correlation between firms that have established more structured business practices and growth strategies, and the performance results at those firms,” Beatty says.

Overall, RIAs’ median assets under management grew from $572 million at the end of 2012 to $582 million in 2013. Average revenues remained largely flat, decreasing slightly from $3.4 million in 2012 to $3.3 million in 2013. Schwab found that 36 percent of RIAs have doubled their AUM and revenues since 2009.

“It’s not just market performance alone,” Beatty says. When looking closely at the numbers, the growth is not just from the markets, it’s coming from new clients and new assets.

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