Market gains, organic growth help RIAs achieve record profits

More than one-third of firms have doubled AUM and revenue since market lows of '09

By Minda Smiley

Jul 10, 2014 @ 8:00 am (Updated 3:28 pm) EST

registered investment advisers, ria, growth, profit, aum

The success of RIA firms continues to grow, driven in part by market performance and continued organic expansion.

In 2013, the median annual revenue for RIA firms escalated to $3.3 million with one-third of these firms earning more than $5 million, according to the 2014 RIA Benchmarking Study by Schwab Advisor Services. The study includes input from more than 1,100 firms with nearly three-quarters of a trillion dollars in AUM.

“Robust new-client acquisition and expanded share of wallet with existing clients among firms in the study were the primary drivers of organic growth,” said Jonathan Beatty, senior vice president of sales and relationship management at Schwab Advisor Services. “This type of growth underscores the power of the independent model and the continued demand for unbiased advice among investors.”

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While the continued growth of RIAs isn't surprising, the study shows that the best-managed firms share certain characteristics that give them an edge over their peers. As was the case last year, this includes a persistent focus on organic growth — the fastest growing firms added roughly 30% more new clients through referrals than their peers.

Enhanced strategic planning and execution ranked third in importance as a top strategy for growth as compared to an 11th-place ranking in 2013, suggesting that firms are looking to establish more efficiently-run businesses.

“We see a compelling correlation between firms that have established more structured business practices and growth strategies and the performance results at those firms,” Mr. Beatty said. “Notably, firm size is not a factor; we see firms in the study outperforming this way in every peer group.”