Practice Management

What the fastest growing RIAs have in common

Schwab study of 1,261 firms finds that overall assets under management climbed 16.2% in 2017 at the median versus 9.6% in 2016

Jul 12, 2018 @ 2:20 pm

By Ryan W. Neal

Business is booming for registered investment advisers.

Regardless of firm size, independent firms are experiencing strong five-year compound annual growth in key metrics like assets under management, revenue and number of clients, according the Charles Schwab's annual RIA Benchmarking Study.

(More: Average client assets top $2 million for first time)

But some are excelling beyond the rest. The fastest growing firms — that is, those in the top 20% with $250 million or more in assets — enjoyed a net organic compound annual growth rate of 15.4% in 2017, versus 3.9% at the median for all other firms. Organic growth is particularly important because it's less dependent on market conditions and better reflects the firm's strategy, value proposition and client satisfaction, according to the Schwab study.

Those firms are also attracting twice the number of new clients, bringing in twice as many assets from those new clients and are finding new assets through business partner referrals and marketing versus existing client referrals.

Jonathan Beatty, senior vice president of sales and relationships management at Schwab Advisor Services, attributes the success to appealing to client needs via strategic marketing 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," Mr. Beatty said in a statement.

Schwab's study of 1,261 firms that custody with Schwab found that overall assets under management climbed 16.2% in 2017 at the median versus 9.6% in 2016, and the five-year compound annual growth rate for AUM was 10.9%, from $358 million in 2013 to $652 million in 2017. Meanwhile, revenue was $3.6 million in 2017, up from $2.2 million in 2013 — representing a five-year CAGR of 9.8%.

The Benchmarking Study offered several "guiding principles" to help other RIAs improve growth.

First, firms should keep client experience at the top of mind by offering services based on the wants and needs of the ideal client.

The top growers are also improving business operations by leveraging technology and developing standardized practices to maximize scalability and manage risk. This includes and a robust cyber security program to safeguard clients and build trust.

While average client size is increasing, Schwab found asset growth from new clients is double that from existing clients (bucking the wisdom that it's easier to grow via held-away assets). The fastest growing RIAs are the ones working to strengthen the firm's reputation among the community they serve, Schwab reported.

(More: Morgan Stanley wants brokers to use new tech to chase $2 trillion in assets held outside the firm)

Finally, firms are deepening their bench by investing in talent. Salaries, bonuses, benefits and other personnel-related costs account for 73% of a firm's annual expenses, according to the study. Firms of all sizes are focused on hiring employees with an emphasis on back-office and administrative staff and relationship managers instead of client-facing senior management.


What do you think?

View comments

Recommended for you

RIA Data Center

Use InvestmentNews' RIA Data Center to filter and find key information on over 1,400 fee-only registered investment advisory firms.

Rank RIAs by

Featured video


The bizarro world of DOL and SEC rule supporters

Managing editor Christina Nelson talks with senior reporter Mark Schoeff Jr. about why groups that supported the Labor Department's fiduciary rule oppose much of the SEC advice package, and vice versa.

Latest news & opinion

10 most affordable U.S. cities for renters

Here are the U.S. cities that are most affordable for renters, according to Business, which compared the cost of rent to average salaries.

9 best - new - financial adviser jokes

Scroll through for nine new financial adviser laughs.

Fidelity CEO says zero-fee funds aimed at expanding its universe

Johnson says way to prosper in financial services is 'by building relationships.'

SEC advice rule contains a huge hole

Jay Clayton aims to clear up investor confusion by drawing a distinction between brokers and advisers in the agency's proposed package of revised standards. But where do dual registrants fit?

9 signs it's time to fire your client

Here are signals that a client should be asked to leave, according to experienced financial advisers.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print