Registered investment advisors’ (RIAs) assets under management rose 28% to an average of $174 million in 2009, up from $136 million in 2008, the 2010 Rydex/SGI AdvisorBenchmarking Annual Study shows. This was the biggest percentage increase in the survey’s 11-year history.
Growth in AUM is the No. 1 goal for 53% of the RIAs surveyed, and that group appears optimistic, indeed, for 42% of those surveyed expect their AUM to grow between 11% and 50% over the next five years. For 79%, growth is expected to be driven by referrals.
Nonetheless, that same number, 79%, said that finding new clients is their biggest challenge, followed by government overregulation (71%) and increased investments in technology (68%).
Asked about areas where they felt their could improve, 47% again cited client acquisition. Nearly half also pointed to marketing.
Profit margins remained consistent with 2008 levels of 19% even though revenues were down from 2007 highs and expenses edged higher. Nearly one-third, 31%, said they are coping with these more challenging business conditions by reducing compensation for their principals and instead reinvesting that money in their business. In fact, 18% have added new services, with an eye to building out their businesses.
Nonetheless, RIAs are not cutting back on compensation for support staff; only 8% have reduced administrative compensation, and only 3% have laid off staff.
“Advisers who have learned to leverage opportunity in a tough and unpredictable economy have managed to continue to grow their businesses successfully,” said Maya Ivanova, research manager for
The study also found that RIAs charge average fees of 0.92%, slightly higher than in 2008, and that the majority of their assets, 34%, are in mutual funds. The 2010 Annual AdvisorBenchmarking Study was conducted through online surveys of 427 RIA firms from February through April 2010.