RIAs Expect More Growth in Next Five Years

This year, RIA’s are optimistic but are finding making the time to focus on business development and growth remains a significant challenge, according to a release of the 2009 Charles Schwab RIA Benchmarking Study.

“Despite the challenges independent advisers face today, firms recognize the opportunity they have to grow without sacrificing the high level of client service for which the industry is known,” said Trish Cox, chief operating officer of Schwab Advisor Services. “But nearly all advisory firms say they are looking across their businesses for ways to increase productivity and efficiency, and marketing and business development activities are no exception.”

While advisers continued to add new clients in 2008, the pace of growth was slower than recent years, according to the survey. In 2008, new client growth rate was 5% at the median, compared to 8% and 9% in 2006 and 2007, respectively. Firms in the 80th percentile and above added new clients at a rate of 12% or higher.

More advisers are dissatisfied with the growth their firms have experienced. The percentage of firms dissatisfied with growth increased from 24% in June 2007 to 35% as of March 2009.

The study found that referrals, particularly from clients, continue to be advisers’ most productive source of new clients and new assets. In 2008, on average, 85% of new clients came through referrals from existing clients, professional colleagues, and custodian programs. Advisers reported that client referrals accounted for more than half (54%) of new business.

Despite the slow growth, advisers are optimistic. Most advisers see the next five years as a time for opportunistic growth, according to Charles Schwab. Thirty-five percent of respondents are planning to grow aggressively, while 49% expect their growth to continue at a more moderate pace.

Advisers listed these strategies as the top three ways to grow over the next five years:

• closing the deal after meeting with a prospect (75%);
• maintaining quality and consistency in client service as firm adds more clients (73%)
• implementing new technologies across the firm to automate processes and build scalability (67%).
  

Most surveyed advisers (82%) could point to at least one potential barrier to growth. The top four potential barriers to growth overall are related to marketing and business development:

• devoting sufficient staff time to business development (52%);
• developing and following a well-thought-out strategy for marketing the firm (38%);
• investing sufficient financial resources to market the firm (38%);
• identifying prospects (35%).
  

The study represents the views of more than 600 firms managing more than $175 billion in combined assets, with 52 firms managing $1 billion or more in assets. On average, participating firms had 325 clients, $380 million in assets under management and $2.5 million in revenue.