The Next Five Years Are a Growth Opportunity, Say Independent Advisors in Charles Schwab RIA Benchmarking Study

Having Time and Resources for Marketing are Key

Monday, August 3, 2009 6:00 am PDT



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SAN FRANCISCO--(BUSINESS WIRE)--Although 2009 has been a taxing year, 84 percent of independent registered investment advisors (RIAs) say they expect to grow at a moderate clip or faster over the next five years, according to the just-released 2009 Charles Schwab RIA Benchmarking Study. A cornerstone of Schwab’s Business Consulting Services platform for independent advisor clients, this year’s study reveals that while advisors are optimistic, they are finding that making time to focus on business development and growth remains a significant challenge amid the current market turmoil and demands from existing clients.

“Despite the challenges independent advisors 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.”

Schwab’s RIA Benchmarking Study, now in its third year, finds that while advisors continued to add new clients in 2008, the pace of growth was slower than recent years. In 2008, new client growth rate was five percent at the median, compared with eight percent and nine percent in 2006 and 2007, respectively. Firms in the 80th percentile and above added new clients at a rate of 12 percent or higher.

The annual Charles Schwab RIA Benchmarking Study captures trends and best practices in the RIA industry based on the experiences of individual firms. Advisor that participate in the study receive a complimentary Peer Benchmarking Report that is customized to their firm’s size and business model. The Peer Benchmarking Report provides detailed insights on topics such as advisor asset and revenue growth, sources of new clients, products and pricing, staffing and productivity, technology and operations, and firm economics. This year’s 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 have 325 clients, $380 million in assets under management and $2.5 million in revenue.

Growth and What Gets in Its Way

While 65 percent of the advisors surveyed are satisfied with the growth their firms have experienced in the past three years, there is a growing undercurrent of advisors who feel there is room for improvement. The percentage of firms dissatisfied with growth increased from 24 percent in June 2007 to 35 percent as of March 2009.

According to the study, most advisors see the next five years as a time for opportunistic growth. Thirty-five percent of respondents are planning to grow aggressively, while 49 percent expect their growth to continue at a more moderate pace. Advisors say they expect technology and client service initiatives to help them get there. In fact, the top three enablers to growth over the next five years as identified by advisors in this study are:

  • Closing the deal after meeting with a prospect (75%) (ranked first in 2007 as well)
  • 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%)

But participating advisors report barriers to growth as well. In fact, 82 percent of advisors in the study identified at least one potential barrier to growth, with marketing and business development named as the top obstacle. Advisors also cited issues related to staffing and organizational structure, strategy and planning and technology operations as barriers as well. 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%)

Referrals: It Really Is Who You Know

The study finds that referrals – and in particular, client referrals - continue to be by far advisors’ most productive source of new clients and new assets. In 2008, on average, 85 percent of new clients came through referrals from existing clients, professional colleagues and custodian programs. In fact, advisors said that client referrals account for 54 percent of new business.

”It is clear that advisory firms view client referrals as a vital part of their business development, but many firms can do a better job maximizing that opportunity, especially now with so many investors seeking a fresh start,” added Cox. ”While 97 percent of firms in our study cite client referrals as a key tactic for growing their firm, a much smaller percent of firms are proactive in pursuing referrals and have a formal process in place that builds on their existing client relationships. That is a missed opportunity for firms seeking to grow.”

The Charles Schwab RIA Benchmarking Study is part of Schwab’s Business Consulting Services practice management platform for RIAs. Grounded in the best practices of leading independent advisory firms, Schwab Business Consulting Services provides insights, guidance, tools and resources to help advisors strategically manage and grow their firms in the areas of marketing and business development, business strategy and planning, technology operations, human capital, transition planning, and compliance. This year’s RIA Benchmarking Study introduced best practices for staff productivity and technology and operations for the first time.

As part of its commitment to help independent advisors fuel their growth, Schwab also recently announced that starting in July it would waive commissions on electronic equity trades and reimburse transfer of account fees charged by contra brokers through June 30, 2010 for new-to-Charles Schwab & Co. clients of independent investment advisors who open accounts by the end of the year.

About Charles Schwab

The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider of financial services, with more than 300 offices and 7.6 million client brokerage accounts, 1.5 million corporate retirement plan participants, 593,000 banking accounts, and $1.2 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 business segment. The Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. More information is available at (0709-10174)

The data in the Charles Schwab 2009 RIA Benchmarking Study is self-reported by study participants and is not verified or validated by Schwab.

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Charles Schwab
Michael S. Cianfrocca, 415-667-0344
Makovsky + Co.
Jonathan Pappas, 212-508-9637

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Sample page from Charles Schwab RIA Benchmarking Study advisor peer report (Graphic: Business Wire)

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