New Report From Charles Schwab Reveals How Independent RIA Firms Balance Delivering Client Service With Building Efficient and Scalable Businesses

Monday, March 2, 2009 6:00 am PST



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SAN FRANCISCO--(BUSINESS WIRE)--In the current economic environment, independent investment advisory firms are looking for ways to be as efficient as possible while still maintaining the high levels of personalized customer service that have become a hallmark of the industry. To help independent advisors meet these goals, Charles Schwab has released a new Schwab Market Knowledge Tools® (MKT) white paper, Best-Managed Firms: The Business of Serving Clients – Productivity in high-touch business. The report examines how some of the industry’s most successful advisors manage their businesses across five key categories of running a firm and serving clients: financial advice and investment management, relationship management, operations and client support, strategy and planning, and marketing and business development.

Information included in the report was gathered from the top 20 percent of qualifying* firms in Schwab’s 2007 RIA Benchmarking Study in terms of productivity, operating income, and revenue growth. Compared to other firms, Best-Managed Firms reported being nearly 75 percent more productive, having 19 percentage points higher profitability, and having 12 percentage points higher revenue growth. Schwab’s 2009 RIA Benchmarking Study is currently being fielded to advisors that custody with Schwab and the results are expected to be ready in June.

“A significant finding in the report is that focusing on the business of running an advisory firm and focusing on working with clients do not have to be mutually exclusive,” said Trish Cox, chief operating officer of Schwab’s Advisor Services division. “In fact, the firms in the report prove that creating a more scalable and efficient business can actually improve service levels, because it gives advisors more time to work with clients.”

In their effort to deliver high-touch client service while maintaining efficient, productive, and scalable businesses, the firms included in the new report share a number of common success factors, including:

  • Placing an emphasis on core strengths: Successful firms tend to focus on their strengths, such as integrated wealth management or asset allocation strategy, to improve their competitive advantage.
  • Providing clients with a firm wide service experience: Many of the firms included in the report seek to provide clients with a consistent service experience across different advisor teams. As a result, they are more likely to meet client expectations, streamline client communications, reinforce the firm’s value to clients, and increase their clients’ engagement with the firm.
  • Centralizing resources, functions and processes: Many of the Best-Managed Firms reported that they centralize key firm functions, such as investment management, client relationship management (CRM), and portfolio management systems, as opposed to having individual teams operate in silos, to avoid unnecessary duplication of roles and responsibilities.
  • Maximizing client referrals: Schwab’s 2007 RIA Benchmarking Study reveals that referrals account for 88 percent of Best-Managed Firms’ new client business, and these firms are growing 50 percent faster from referral sources versus all other firms.
  • Prioritizing business planning and strategic growth: Successful advisors are more likely to set time aside for business strategy and planning than other firms. These firms tend to establish longer-term business plans that look three, five and 10 years into the future, dedicate time to succession planning, and commit to measuring firm performance against goals.

“Highly successful firms have found important ways to do more with less,” said Cox. “On average, the firms included in the report have fewer team members than other firms, but successfully manage more clients and assets. They have lower overall expenses, their firms are more profitable, and their principals have higher average incomes.”

The new report refutes a number of common myths about running an independent investment advisory business. Contrary to some long-held beliefs, the firms included in the report demonstrate that:

  • High-touch client service can be scalable
  • Standardizing client service can actually enhance a client’s experience
  • Principals do not have to manage all client relationships
  • Focusing on growth does not have to detract from focusing on existing clients
  • Investment in technology and staff can significantly improve a firm’s bottom line

“Although it is a difficult time for any business in the financial services industry, there are many independent advisory firms that are well-positioned strategically and financially to grow and excel,” added Cox.

Charles Schwab is a leading provider of custodial, operational and trading support for more than 5,700 independent investment advisory firms.

About Schwab Market Knowledge Tools® (MKT) Reports

The Schwab Market Knowledge Tools series is an ongoing program of industry research reports, white papers and guides from Charles Schwab designed to keep investment advisors on the forefront of trends and competitive challenges facing the industry today. Offered exclusively to Charles Schwab’s valued clients, the MKT program delivers the kind of relevant and timely information needed for future business planning.

About Charles Schwab

The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider of financial services, with more than 300 offices and 7.4 million client brokerage accounts, 1.5 million corporate retirement plan participants, 468,000 banking accounts, and $1.1 trillion in client assets. Through its operating subsidiaries, the company 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,, 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; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Advisor Services division. The Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. More information is available at (0309-7335)

* Qualifying firms had at least $1 million in revenue.

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Charles Schwab
Michael S. Cianfrocca, 415-667-3252

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Trish Cox, chief operating officer, Schwab's Advisor Services division (Photo: Business Wire)

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