The RIA channel continues to grow. More specifically, the “independent advisory industry remains on a growth trajectory” and outpaced the previous year’s gains, according to Charles Schwab.
Schwab’s 2018 RIA Benchmarking Study indicates AUM grew 16.2 percent in 2017 at the median versus 9.6 percent in 2016, and the five-year compound annual growth rate (CAGR) for AUM was 10.9 percent, from $358 million in 2013 to $652 million in 2017.
Meanwhile, revenue accelerated from $2.2 million in 2013 to $3.6 million in 2017, a five-year CAGR of 9.8 percent.
“Independent advisors have certainly enjoyed buoyant investment returns but have also grown their businesses organically and strategically, which positions them well for sustainable growth even in the face of market volatility,” Jonathan Beatty, senior vice president, sales and relationship management, Schwab Advisor Services, said in a statement. “Firms are fueling their organic growth by differentiating and marketing their value propositions, improving the client experience, and strategically expanding their service offerings to meet the needs of their ideal clients.”
The fastest-growing firms in the 2018 Study exhibited several key attributes:
- Five-year net organic growth CAGR is almost four times that of all other firms: 15.4 percent compared with 3.9 percent at the median for all other firms.
- Fastest-growing firms won close to double the number of new clients in 2017: 36 at the median versus 19 for all other firms.
- These firms also saw twice the assets from new clients compared with all other firms: $48 million versus $24 million at the median.
- For fastest-growing firms, more new client assets come from a combination of business partner referrals and other marketing (60 percent) versus existing client referrals (40 percent).
“The most successful firms are focusing their ability to appeal to and meet the needs of their ideal clients,” Beatty added, “and they deliver their message to clients and prospects through strategic communication 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.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
