Charles Schwab released its 10th annual RIA benchmarking study on Friday, showing independent advisory firms in 2015 maintained a now decade-long growth trajectory.
Jonathan Beatty, the senior vice president of sales and relationship management at Schwab Advisor Services, said he’s “very bullish” the trend will continue. Despite sideways markets, increased volatility and changing regulatory environments, advisors have built enterprises to last.
“Credit the nimbleness of the independent advisor business model, the ability to adapt and evolve to all of these challenges,” Beatty told WealthManagement.com.
Asset and revenue growth slowed slightly, but remain positive. Average assets under management rose from $365 million in 2011 to $588 million in 2015, while average revenue rose from $2.3 million to $3.6 million in the same time period. More than half of firms have doubled their assets under management since the lows of 2009, and a quarter have doubled their revenues.
Firms of all sizes are experiencing growth, though the Schwab study found that revenue growth is compounding in the largest firms.
Beatty said at a fundamental level, this success started with client retention, with it remaining high at 97 percent. Average client size also increased 22 percent, with three-quarters of new clients coming through referrals.
“In a sideways-moving market, it’s pretty spectacular,” Beatty said. “Getting clients through volatility… it really goes to their core strength and the way they are acquiring new clients through reputational marketing. If you have a strong client experience and clients are pleased, they are apt to refer.”
The study found that RIAs continue to invest in technology to improve productivity and efficiency, as well as in strategies for future growth. A third of firms with more than $1 billion AUM and a quarter of firms with less than $1 billion AUM are looking at acquisitions.
Firms of all sizes are also concerned with adding talent. Beatty said one strategy firms are utilizing is sharing company ownership among employees to attract and retain top talent. Beatty said it “creates a culture around adding value” and a “relentless focus on growth.”
“Top performers are firms that view growth—both organic and inorganic—as non-negotiable, but achieve this growth without sacrificing the depth and quality of their existing client relationships,” Beatty said in a statement. “They find innovative ways to streamline operations, seize opportunity and achieve scale by taking advantage of best practices and resources at their fingertips.”
The Schwab benchmarking study surveyed 1,128 RIA firms representing three-quarters of a trillion dollars in AUM.
