As the bull market continued to advance throughout 2013, advisory firms experienced another banner year, with the average firm seeing a 19.2% increase in AUM year-over-year, according to preliminary data from the 2014 InvestmentNews Financial Performance Study of Advisory Firms.
The report, which is due for release next month, is the 2014 installment of InvestmentNews' adviser benchmarking series (formerly conducted by Moss Adams). The 2013 growth pace was even hotter than 2012's, when our 2013 benchmarking study found that firm AUM climbed an average of 15.5%.
The study, which tracked data from more than 300 firms, found that while the markets accounted for 39% of the total AUM increase at the average firm — the S&P 500 gained 30% in 2013 — new clients accounted for the largest increase, with 45% of new assets. That's an improvement from last year, where, despite the market return being significantly lower (the S&P 500 returned 13% in 2012), the market still accounted for the identical proportion of AUM increase to 2013 — 39% of new assets. And existing clients accounted for a higher percentage of the overall AUM increase in 2012 as well — 22%, versus just 16% in 2013.
Referrals from both clients and other professionals made up just over half (53%) of new business, with the rest coming from other business development initiatives.
Have advisers turned a corner in attracting new clients? The improvement we're seeing in advisory firms' ability to land new clients in this year's benchmarking study is an encouraging sign that firms are successfully courting new clients and are not taking the prolonged success of the markets for granted. If the industry is to continue its maturation, it must have sturdy client relationships and business development procedures in place for both the good times and the bad. In the end, success is always a function of finding the right clients and maximizing the productivity of a talented team of people in the firm.