Independent Advisors Continue on Growth Trajectory While Building Firms to Weather Headwinds

The independent advisory industry remains on a growth trajectory,
according to results from the 2018 RIA Benchmarking Study from Charles
Schwab, the largest study of its kind in the industry. The data from
Schwab’s latest 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,” said Jonathan Beatty, senior vice president, sales
and relationship management, Schwab Advisor Services. “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 Benchmarking Study findings reinforce Schwab Advisor Services’ Guiding
Principles for Advisory Firm Success, a foundational framework that
helps independent advisors address the complexities of growing their
firms and creating enduring business enterprises:

Guiding Principles for Advisory Firm Success

(Results for firms with $250 million or more in AUM unless
otherwise noted)

 

AUM

Clients perprofessional(median)

AUM perprofessional(median)

Over $2.5 billion

45

$163 M

$500M – $750M

53

$99 M

$100M – $250M

55

$55 M

Attributes of the fastest-growing firms

For more than a decade, the Benchmarking Study has examined attributes
of the fastest-growing firms: those firms that are the top 20 percent of
firms with $250 million or more in AUM based on a five-year net organic
CAGR.

The fastest-growing firms in the 2018 Study exhibited several key
attributes3:

“The most successful firms are focusing their ability to appeal to and
meet the needs of their ideal clients,” said Beatty, “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.”

About Schwab’s RIA Benchmarking Study

Schwab designed the RIA Benchmarking Study to capture insights in the
RIA industry based on study responses from individual firms. The 2018
study provides information on such topics as asset and revenue growth,
sources of new clients, products and pricing, staffing, compensation,
marketing, technology, and financial performance. Fielded from January
to March 2018, the study contains self-reported data from 1,261 firms
that custody their assets with Schwab Advisor Services and represent
slightly over a trillion dollars in AUM, making this the leading study
in the RIA industry. This self-reported information was not
independently verified.

Since the inception of the study in 2006, more than 3,400 firms have
participated, with many repeat participants. Participant firms represent
various sizes and business models. They are categorized into 12 peer
groups—seven wealth manager groups and five money manager groups—by AUM
size. Unless otherwise noted, study results are for all firms with $250
million or more in AUM, representing the vast majority of total assets
managed by this year’s participants.

The fastest-growing firms are the top 20 percent of firms with $250
million or more in AUM as determined by net organic growth (five-year
net organic compound annual growth rate). Net organic growth is the
change in assets from existing clients, new clients, and assets lost to
client attrition before investment performance is taken into account,
and it excludes the growth from acquisitions, divestitures, and advisors
joining or leaving a firm with assets.

To view more results of the 2018 RIA Benchmarking Study and the latest
Independent Pulse, visit www.aboutschwab.com/press/research.
Also see additional Benchmarking results at advisorservices.schwab.com/benchmarkingresults
and learn more about the Guiding Principles at advisorservices.schwab.com/managing-your-business/business-consult.

Graphics and data will also be shared from @Schwab4RIAs on Twitter.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help
individuals create a better tomorrow. We have a history of challenging
the status quo in our industry, innovating in ways that benefit
investors and the advisors and employers who serve them, and championing
our clients’ goals with passion and integrity. More information is
available at www.aboutschwab.com.
Follow us on Twitter,
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and LinkedIn.

Disclosures

Through its operating subsidiaries, The Charles Schwab Corporation
(NYSE: SCHW) provides a full range of securities brokerage, banking,
money management and financial advisory services to individual investors
and independent investment advisors. Its broker-dealer subsidiary,
Charles Schwab & Co., Inc. (member SIPC,
www.sipc.org),
and affiliates offer a complete range of investment services and
products including an extensive selection of mutual funds; financial
planning and investment advice; retirement plan and equity compensation
plan services; compliance and trade monitoring solutions; referrals to
independent fee-based investment advisors; and custodial, operational
and trading support for independent, fee-based investment advisors
through Schwab Advisor Services. Its banking subsidiary, Charles Schwab
Bank (member FDIC and an Equal Housing Lender), provides banking and
lending services and products. More information is available at www.schwab.com
and www.aboutschwab.com.

Schwab Advisor Services™ serves independent investment advisors and
includes the custody, trading, and support of Schwab.

Independent investment advisors and Schwab are independent of each other
and are not affiliated with, sponsored by, endorsed by, or supervised by
each other. For informational purposes only.

0718-8M3B

1 Data represents median results for firms with $250 million
or more in AUM, unless otherwise noted.

2 Fastest-growing firms are the top 20 percent of firms with
$250 million or more in AUM based on five-year net organic compound
annual growth rate. Net organic growth is the change in assets from
existing clients, new clients, and assets lost to client attrition.

3 Fastest-growing firms are the top 20% of firms with $250
million or more in AUM based on five-year net organic CAGR. All other
firms represent the remaining 80% of firms.

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