InvestmentNews Research, BlackRock launch new study of “Elite” RIAs

New York, May 28, 2015 – With the business of providing financial advice fast evolving – presenting advisers with new service opportunities as well as urgent practice challenges – InvestmentNews Research, in partnership with BlackRock Inc., has launched a new study today examining the primary keys to growth and success for registered investment advisory (RIA) firms.

Specifically, “The Study of Elite RIAs” has identified how a select portion of advisers have managed to meet this changing environment’s new demands, attract assets and clients at an accelerated rate – and ultimately achieve industry-leading levels of growth and performance.

The report, now available at InvestmentNews.com/Elite, also uses this analysis of Elite RIAs to prescribe a series of short- and long-term steps to future success for advisers. “With the way investors’ demands, levels of education and access to advice have evolved in recent years, RIAs will have to approach their businesses with a completely different mindset going forward,” said Mark Bruno, associate publisher at InvestmentNews and head of InvestmentNews Research.

“Expecting to succeed on the heels of market appreciation, investment performance and word-of-mouth marketing alone is a recipe for mediocrity, at best,” Bruno continued. “This research is designed to highlight all of the truly different strategic levers RIAs can pull to drive growth over the next several years.”

Notably, The Study of Elite RIAs explores global challenges facing the advice industry and provides strategies for developing a thriving RIA practice across several interrelated areas, namely:
• Firm organization, structure and strategic management
• Investment management
• Business development and competitive differentiation
• Technology and marketing

Key Findings

Having a strategy and plan for acting on each of these will set the stage for future success: According to our research, “lack of a marketing strategy and focus” was the top limitation (45%) on growth over the last two years for all advisory firms that participated in the study, with “inadequate client acquisition and targeting” ranking as the second largest inhibitor of success (37%).

As a result, the study found the industry’s Elite RIAs are poised to take a vastly different strategic approach to growing their businesses going forward. They will shift their focus to place more emphasis on improving their internal operations and human capital management – acknowledging the evolution of their businesses and the need to develop plans for strategic growth.

Specifically, while 67% of Elite firms indicated that client acquisition and retention of clients was the primary driver of success over the last several years, looking ahead, only 38% of Elite firms said this would be the leading source of growth going forward. Specifically, the study’s Elite RIAs reported that “having the right employees in the right roles” will influence their future success more than any other factor (57%), with “marketing focus and strategy” (44%) and “growth/retention of existing clients” and “effective use of technology” (both at 38%) ranking as the second and third most important factors, respectively.

“The changing strategic priorities of leading RIA firms strongly illustrate their entrepreneurial spirit and desire to meet a broad range of urgent client needs head-on,” said Hollie Fagan, Managing Director and Head of BlackRock’s RIA Business. Great investment management, whether built in-house or outsourced, has become table stakes, while technology solutions, whether for portfolio construction, risk analysis or enhancing financial planning, are mission-critical investments for growing firms.”

The Role of New Technology

The study provides a comprehensive data set that identifies how advisers plan to leverage and develop new technology. In particular, the study focuses on how advisers are using technology to improve productivity from a marketing and investment management perspective – and how and why robo-platforms are expected to be integrated into their businesses.

“Contrary to popular opinion, our research found that only a minority of advisory firms view the rise of the robos as a threat,” said Bruno. “The Elite firms actually view it as a tremendous opportunity to expand their offering and client base, and our findings offer compelling insights into how the robo-platform could really evolve over the next several years.”

Investment Management a Key Differentiator

According to the research, Elite RIAs firmly believe that their investment focus, processes and performance are key differentiators, enabling them to communicate a more powerful and robust marketing message to clients, as well as attract new clients. Nearly six of 10 (59%) of Elite RIAs cite their superior investment process and performance as reasons for their success, compared with 42% of other advisers.

“As competitive entrants to the wealth management industry seek to commoditize and automate the investment management function, Elite firms are doing more to add value to investment management,” the report notes. “One of Elite RIAs’ strongest differentiators could be even more pronounced in the near future.”

Here are the report’s key action steps for Elite status:
SHORT-TERM ACTIONS (NEXT 6-12 MONTHS)

Human capital management and structure

• Evaluate marketing automation technologies and start to develop a systematic marketing engine to supplement internal, passive referrals.

Business development and marketing

• Assess where current and future revenue and AUM growth will be coming from, and identify key referral sources and ways to enhance those processes.
• Evaluate marketing automation technologies and start to develop a systematic marketing engine to supplement internal, passive referrals.

Investment Management

• Enhance your investment management approach – specifically giving consideration to how truly customized portfolios are for each of your clients – to continue to differentiate your firm.
• Evaluate if the underlying investment philosophy of your firm can be easily understood – and consistently re-articulated by clients.

Technology

• Identify one or two critical back-office systems that should be upgraded, such as CRM, financial planning, rebalancing, portfolio management, document management, cyber security, and create a short list of vendors that can be interviewed and leveraged.
• Begin to understand Robo technology platforms and how they can potentially help to serve new markets with the assistance of automation.
• Upgrade your website and ensure that you can be found (and easily viewed) when searched by prospects on their mobile devices

LONG-TERM ACTIONS (NEXT 3-5 YEARS)

Human capital management and structure
• Develop a formal organizational structure and committee structure that directly supports and enhances your firm’s true competitive differentiator and value proposition.
• Develop a long-term career path and strategic compensation system to attract and retain the best people. This will provide scale and sustainability, and ultimately facilitate succession and greater enterprise value of the firm.
• Implement a strategic plan that that outlines firm goals for growth – and align these goals with employee compensation and career path incentives.

Investment Management

• Make a strategic high-level investment hire – such as a chief investment officer – in order to provide superior, centralized investment management services that can differentiate your practice

Technology, marketing and business development

• Enhance your firm’s website to include a robo-platform, or develop a formal relationship with a robo provider, to attract and retain next-generation investors and implement an “incubator” for clients whose assets will likely continue to grow as they reach peak income years

About This Study
This study was developed by InvestmentNews Research, in partnership with BlackRock, to identify the behaviors and strategies that have helped the most successful registered investment advisory firms outgrow their peers in recent years.

To support this research, a survey was distributed to InvestmentNews’ audience between February 6, 2015 and March 18th, 2015. We received 410 completed survey responses, 61 of whom were deemed “Elite RIAs” – all RIA-affiliated firms with over $250M in AUM who ranked in the top 50th percentile in firm productivity. The findings of this survey may be accepted as accurate, at a 95% confidence level, within a sampling tolerance of approximately +/- 3.4%.

About InvestmentNews

Owned by Crain Communications Inc., InvestmentNews is the premier provider of news, data, research and events to the financial advisory industry. Through our weekly newspaper, website, data centers, benchmarking reports and conferences, we provide industry-leading tools and resources that allow financial advisers to learn more about their businesses, clients and competition.

About InvestmentNews Research

The mission of InvestmentNews Research is to provide financial advisers with the industry’s most informative practice management studies and benchmarking reports.
Our benchmarking studies are a leading source of market intelligence for advisory firms and industry partners, such as custodians, broker-dealers, service providers and professional organizations.

In 2009, InvestmentNews acquired two bellwether benchmarking studies from Moss Adams LLP — the Adviser Compensation & Staffing Study and the Financial Performance Study of Advisory Firms. We continue to improve and expand these two critical industry studies, while we have also introduced new studies, such as this study on technology, that support the growth and development of financial advisory firms.

About BlackRock

BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At March 31, 2015, BlackRock’s AUM was $4.774 trillion. BlackRock helps clients meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. Headquartered in New York City, as of March 31, 2015, the firm had approximately 12,300 employees in more than 30 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at www.blackrock.com | Twitter: @blackrock_news | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock

Related Topics: BlackRock Inc.