RIAs see sizable drop in revenue per client

Schwab survey also uncovers drop in margins, slowdown in number of new clients in 2009

Jul 7, 2010 @ 2:57 pm

By Lisa Shidler

It was another tough year to be a financial adviser — or at least, that seems to be one of the takeaways from Charles Schwab Corp.'s much-anticipated RIA benchmarking study.

In the study, which was released today, Schwab found that, on average, financial advisory firms generated $6,900 per client in 2009. That's a sizable drop from the $7,800 per client the firms generated in 2008. What's more, the median operating income earned by an registered investment adviser fell from 15% of revenue in 2008 to barely 10% in 2009.

Granted, the 870 firms in the survey – which manage about $300 billion in combined assets – predict a 10% bump-up in revenue this year. But that forecast seems a bit Pollyanna-ish, given the latest market gyrations and a negative public perception about investing and those who offer advice.

Adding clients will continue to be tough, coming off 2009, in which the median RIA firm increased the number of clients by 2.6%. That's half the increase in 2008.

In fact, only 58% of advisers told Schwab they are satisfied with their growth over the past three years. In last year's study, 65% said they were satisfied with their firm's growth numbers.

Still, 84% of the surveyed advisers said they plan to expand their businesses aggressively or moderately over the next five years.

How? Advisers indicated they are becoming more focused on growth strategies and planning. More than four in 10 advisers said they intend to develop a sophisticated marketing strategy to boost their firms' profiles. That's not a bad idea, since 73% of advisers noted that a lack of marketing and business development planning has held back their companies.

“Three years ago, it was about ‘how do we grow as fast as possible?' for many firms,” Bernie Clark, senior vice president and head of Schwab Advisor Services, said in a statement. “Now, advisors are much more focused on ‘how do we really plan for growth and do it in a strategic and deliberate way?'”

Top firms should have a somewhat easier time of it. Schwab found that marquee firms continue to outpace rivals in growing their operations. From 2006 to 2009, the top 20% of firms reported a compounded annual growth rate of 6.1% in assets under management. That compares to 2.4% for all other firms. Likewise, the top firms reported a 7.3% increase in compounded annual revenue (compared to 0.5% for all other firms) . These marquee firms also saw a 5.7% hike in number of clients, compared to 4% for all other firms.

In addition, the top 20 percent had 57 percent higher assets under management per professional in 2009, 63 percent higher revenue per professional, and 51 percent more clients per professional.

“As firms grow, the key to increased productivity seems to be higher assets and revenues per client, “ said Clark, “as opposed to spending less to serve the same size client.”


What do you think?

View comments

Most watched


Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.


Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

Latest news & opinion

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime

4 strategies for Roth conversions

There's never been a better time to do a Roth conversion, and here are several ways to go about it.


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 investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

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


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print