While a rising stock market helps lift all financial advisory firms' books of business, the real game for many is net new money. According to Schwab Advisor Services annual RIA benchmarking survey, net new money has grown at a consistent 4.5 percent annually since 2010, despite a stock market that has returned to stockholders and investors an average of 11 percent during that same time frame, as measurd by the S&P 500.
So which firms have been more successful in capturing that new money? Those that have mastered the art of asking for referrals, either from clients or other centers of influence, according to the report.
The top 20 percent of firms in terms of net new money had a median growth rate of 15 percent. These firms, according to Schwab, generated an average of 36 percent more new clients from referrals than all other firms.
Other RIAs are clearly looking at buying their way into efficiencies of scale by buying other firms. A full quarter of RIAs in the $100 million to $1 billion range indicated they are actively shopping for firms to acquire. Among those managing more than $1 billion, the number jumps to 34 percent.
"With the compelling benefits of increased scale, it's not surprising that RIAs are eager to move to the next level with their busines," said John Beatty, senior vice president and relationship manager with Schwab Advisor Services.
One surprising result from the study: The dramatic drop in the number of RIA firms that report "technology integration" is a challenge. Last year, 59 percent reported it as a challenge; this year, only 38 percent said so. Beatty suggests firms have largely gotten their internal technology together, and now will focus on bringing new gadgets and tech tools to clients: Almost three-quarters of RIA firms will invest in mobile technology in the coming year, and 67 percent in cloud-based technologies, according to the survey.