2018 RIA Benchmarking Study from Charles Schwab
indicates continued upward trajectory as advisors focus on client
acquisition, marketing, and operational excellence
STUDY HIGHLIGHTS:
- Adding new clients has outsize
impact on assets under management (AUM) growth: Asset growth
from new clients is more than twice that from existing clients for
a majority of firms.1
- Average assets per client surpasses
$2 million mark: For first time in the Study’s history, average
assets per client are more than $2 million for firms with over $250
million in AUM.
- Net organic asset growth helps drive
overall AUM growth: Net organic growth contributed 5.6 percent
to firms’ asset growth in 2017 and 13.6 percent for fastest-growing
firms.2
- Marketing strategies lead to more
new clients and assets: Firms that document both their ideal
client persona and client value proposition as part of an overall
marketing strategy attract more new clients and assets from new
clients compared with those who do not.
- Competition for talent heats up:
Nearly three quarters (73%) of firms are planning to hire in the
next 12 months, and 41 percent recruited from other RIA firms in
2017.
The independent advisory industry remains on a growth
trajectory, according to results from the 2018 RIA Benchmarking
Study from Charles Schwab, the largest study of its kind in the
industry. The data from Schwab’s latest Study indicates AUM grew
16.2 percent in 2017 at the median versus 9.6 percent in 2016, and
the five-year compound annual growth rate (CAGR) for AUM was 10.9
percent, from $358 million in 2013 to $652 million in 2017.
Meanwhile, revenue accelerated from $2.2 million in 2013 to $3.6
million in 2017, a five-year CAGR of 9.8 percent.
“Independent advisors have certainly enjoyed buoyant investment
returns but have also grown their businesses organically and
strategically, which positions them well for sustainable growth
even in the face of market volatility,” said Jonathan Beatty,
senior vice president, sales and relationship management, Schwab
Advisor Services. “Firms are fueling their organic growth by
differentiating and marketing their value propositions, improving
the client experience, and strategically expanding their service
offerings to meet the needs of their ideal clients.”
The Benchmarking Study findings reinforce Schwab Advisor
Services’ Guiding Principles for Advisory Firm Success, a
foundational framework that helps independent advisors address the
complexities of growing their firms and creating enduring business
enterprises:
Schwab Advisor Services
Guiding Principles for Advisory Firm
Success
2018 RIA Benchmarking Study – Data Highlights
(Results for firms with $250 million or
more in AUM unless otherwise noted)
Effective planning and execution is a leading indicator of success
- Enhancing strategic planning and execution is among the top
five strategic priorities, following only new client acquisition
and improving productivity with technology.
Value is defined through your clients’ eyes
- More than half of firms (51%) have documented both an ideal
client persona and a client value proposition.
- The firms that do this win 26 percent more new clients and 41
percent more new client assets than those that do not.
- A growing number of firms have added services that address
clients’ unique needs.
- Charitable planning services were offered at 80 percent of
firms in 2017, up from 63 percent of firms in 2013.
- Family education services were offered by 72 percent of firms
in 2017, compared with 56 percent in 2013.
- Several other services that became more widely adopted in 2017
include: tax planning (76%), lifestyle management (33%), bank
deposits (32%), life insurance products (31%), and annuities
(31%).
Operational excellence creates greater capacity for clients
- Standardized operating margins ranged from 22.9 to 29.2 percent
in 2017 among the peer groups.
- Operating discipline provides increased capability and
scalability, enabling advisors to spend more time with
clients.
AUM
Clients perprofessional(median)
AUM perprofessional(median)
Over $2.5 billion
45
$163 M
$500M - $750M
53
$99 M
$100M - $250M
55
$55 M
Your reputation is your brand
- In 2017, 46 percent of firms created a documented marketing
plan and 49 percent had a marketing budget.
- Approximately one in three firms document their referral goals
from existing clients and from business partners, or centers of
influence.
- In addition to referrals, which are foundational to organic
growth, firms leveraged a range of digital marketing channels to
help their firms grow: email newsletters (62%), social media (58%),
and video (22%).
- The median firm increased its client base by 4.8 percent in
2017, compared with 3.6% in 2016.
People are your most important asset
- Nearly three quarters (73%) of firms are planning to hire in
the next 12 months, and 41 percent recruited from other RIA firms
in 2017.
- Eighty percent of firms plan to add relationship managers or
investment professionals, while 65 percent plan to hire
administrative staff.
- The largest firms are hiring most aggressively: 69 percent of
firms with over $2.5 billion in assets plan to hire relationship
managers in 2018, while 84 percent plan to add support staff.
Attributes of the fastest-growing firms
For more than a decade, the Benchmarking Study has examined
attributes of the fastest-growing firms: those firms that are the
top 20 percent of firms with $250 million or more in AUM based on a
five-year net organic CAGR.
The fastest-growing firms in the 2018 Study exhibited several
key attributes3:
- Five-year net organic growth CAGR is
almost four times that of all other firms: 15.4 percent compared
with 3.9 percent at the median for all other firms.
- Fastest-growing firms won close to
double the number of new clients in 2017: 36 at the median versus
19 for all other firms.
- These firms also saw twice the assets
from new clients compared with all other firms: $48 million versus
$24 million at the median.
- For fastest-growing firms, more new
client assets come from a combination of business partner referrals
and other marketing (60%) versus existing client referrals
(40%).
“The most successful firms are focusing their ability to appeal
to and meet the needs of their ideal clients,” said Beatty, “and
they deliver their message to clients and prospects through
strategic communication channels. With the success of this industry
comes more competition, and the firms who thrive are those who
effectively amplify their brands, invest in their people, focus on
best practices and deploy the right technology to drive operational
excellence and an optimal client experience.”
About Schwab’s RIA Benchmarking Study
Schwab designed the RIA Benchmarking Study to capture insights
in the RIA industry based on study responses from individual firms.
The 2018 study provides information on such topics as asset and
revenue growth, sources of new clients, products and pricing,
staffing, compensation, marketing, technology, and financial
performance. Fielded from January to March 2018, the study contains
self-reported data from 1,261 firms that custody their assets with
Schwab Advisor Services and represent slightly over a trillion
dollars in AUM, making this the leading study in the RIA industry.
This self-reported information was not independently verified.
Since the inception of the study in 2006, more than 3,400 firms
have participated, with many repeat participants. Participant firms
represent various sizes and business models. They are categorized
into 12 peer groups—seven wealth manager groups and five money
manager groups—by AUM size. Unless otherwise noted, study results
are for all firms with $250 million or more in AUM, representing
the vast majority of total assets managed by this year’s
participants.
The fastest-growing firms are the top 20 percent of firms with
$250 million or more in AUM as determined by net organic growth
(five-year net organic compound annual growth rate). Net organic
growth is the change in assets from existing clients, new clients,
and assets lost to client attrition before investment performance
is taken into account, and it excludes the growth from
acquisitions, divestitures, and advisors joining or leaving a firm
with assets.
To view more results of the 2018 RIA Benchmarking Study and the
latest Independent Pulse, visit www.aboutschwab.com/press/research.
Also see additional Benchmarking results at
advisorservices.schwab.com/benchmarkingresults and learn more about
the Guiding Principles at
advisorservices.schwab.com/managing-your-business/business-consult.
Graphics and data will also be shared from @Schwab4RIAs on
Twitter.
About Charles Schwab
At Charles Schwab we believe in the power of investing to help
individuals create a better tomorrow. We have a history of
challenging the status quo in our industry, innovating in ways that
benefit investors and the advisors and employers who serve them,
and championing our clients’ goals with passion and integrity. More
information is available at www.aboutschwab.com. Follow us on
Twitter, Facebook, YouTube and LinkedIn.
Disclosures
Through its operating subsidiaries, The Charles Schwab
Corporation (NYSE: SCHW) provides a full range of securities
brokerage, banking, money management and financial advisory
services to individual investors and independent investment
advisors. Its broker-dealer subsidiary, Charles Schwab & Co.,
Inc. (member SIPC, www.sipc.org), and affiliates offer a complete
range of investment services and products including an extensive
selection of mutual funds; financial planning and investment
advice; retirement plan and equity compensation plan services;
compliance and trade monitoring solutions; referrals to independent
fee-based investment advisors; and custodial, operational and
trading support for independent, fee-based investment advisors
through Schwab Advisor Services. Its banking subsidiary, Charles
Schwab Bank (member FDIC and an Equal Housing Lender), provides
banking and lending services and products. More information is
available at www.schwab.com and www.aboutschwab.com.
Schwab Advisor Services™ serves independent investment advisors
and includes the custody, trading, and support of Schwab.
Independent investment advisors and Schwab are independent of
each other and are not affiliated with, sponsored by, endorsed by,
or supervised by each other. For informational purposes only.
0718-8M3B
1 Data represents median results for firms with $250 million or
more in AUM, unless otherwise noted.
2 Fastest-growing firms are the top 20 percent of firms with
$250 million or more in AUM based on five-year net organic compound
annual growth rate. Net organic growth is the change in assets from
existing clients, new clients, and assets lost to client
attrition.
3 Fastest-growing firms are the top 20% of firms with $250
million or more in AUM based on five-year net organic CAGR. All
other firms represent the remaining 80% of firms.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180712005176/en/
Schwab Corporate Public RelationsMeredith Richard,
212-403-9255Meredith.Richard@schwab.comorThe Neibart GroupMayrav
Weiss, 718-801-8864sas@neibartgroup.com
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