Despite this year’s arduous business environment, independent RIAs remain optimistic, according to the results of the 2009 Charles Schwab RIA Benchmarking Study. In fact, 84% of advisers surveyed expect to grow moderately or faster over the next five years, with 35% predicting aggressive growth and 49% seeing growth at a more modest pace looking forward.
Now in its third year, the Charles Schwab RIA Benchmarking Study measures the trends and best practices in the RIA industry. For this year’s study, 600 firms managing more than $1.75 billion in combined assets and 52 firms managing $1 billion or more in assets were surveyed. Participating firms had an average of 325 clients, $380 million in assets under management and $2.5 million in revenue.
Advisers expect three main aspects of their business to be integral to their growth over the next five years: closing the deal after meeting with a prospect (75%), maintaining quality and consistency in their client relationships as they add more clients (73%) and implementing new technologies that will automate processes and build scalability (67%).
And adding new clients they are. In 2008, the median new client growth rate was 5%—an impressive feat given the recessionary environment, though down from 9% in 2007 and 8% in 2006. Firms in the 80th percentile and above added new clients at a rate of 12% or higher.
Referrals—including those from existing clients, professional colleagues and even custodial programs—remain the No. 1 source of new business. More than half (54%) of new business originated from clients, though many advisers fail to sufficiently seek out this type of referral.
“While 97% of firms in our study cite client referrals as a key tactic for growing their firm, a much smaller percent of firms are proactive in pursuing referrals and have a formal process in place that builds on their existing relationships,” said Trish Cox, chief operating officer of Schwab Advisor Services. “That is a missed opportunity for firms seeking to grow.”
Advisers also acknowledged barriers that have the potential to significantly impede their growth over the next few years. More than half (52%) of the advisers surveyed predict that they’ll struggle to devote enough time to business development, and 38% expect to have a problem developing and following a well-thought-out strategy for marketing their firms. Given the volatility of the last year and a half, it’s not surprising that 38% of advisers expect investing sufficient financial resources in the marketing of their firms to be an issue as well. Thirty-five percent saw identifying prospects as an obstacle.
Advisers who participated in the survey received a complimentary peer benchmarking report that was customized to the firm’s size and business model.