Charles Schwab: Business Booming for RIAs

The registered investment advisor (RIA) market is booming, with Charles Schwab recently finding that assets under management for the industry grew 16.2% year over year in 2017, while revenue grew 9.8% on a five-year compound annual growth rate (CAGR) to $3.6 million from $2.2 million in 2013. What’s more, the five-year CAGR for assets under management was 10.9%, reaching $652 million in 2017 compared with $358 million in 2013.

A large reason for the booming business: RIAs are freeing up more time to focus on marketing and client acquisitions. “Firms are gaining more operational excellence, which is creating a greater capacity to spend time on marketing, and the net result is a lift in organic growth and acquisition of new clients,” said Jonathan Beatty, senior vice president, sales and relationship management at The Charles Schwab Corporation’s (SCHW) Schwab Advisor Services, in a recent interview. “The overall growth story is that this industry is intact and thriving.”

With low-cost, passive DIY investing all the rage, the advisor market has been in a state of transformation. It’s no longer enough to offer clients asset allocation advice – advisors have to provide a value-add in order to get clients to pay for their help, and that means providing a bevy of financial planning advice beyond just investments. RIAs are responding to that requirement by embracing technology to automate some processes so that they can spend more time with clients and expand their businesses.

[TradeStation is a powerful tool to take your trades to the next level. Read Investopedia’s TradeStation review to explore your options.]

RIAs With a Plan Make More Money

Charles Schwab’s 2018 RIA Benchmarking Study, which polls firms with $250 million or more in assets under management, found that enhancing strategic planning and execution are among the top strategies for RIAs, along with landing new clients and improving productivity with technology.

What’s more, Schwab found that more than half of the RIA firms surveyed, or 51%, have documented the ideal client that they want to attract and the value proposition for that client. Those that did so were able to bring on 26% more new clients and 41% more new client assets than those that didn’t. “It’s important for a firm to document for the organization the understanding of who their ideal client is for their services,” said Beatty. “Persona, in essence, is understanding the client needs and attributes so they are best prepared to serve.”

The survey also revealed that firms that are expanding into new areas to meet the unique needs are adding services such as charitable planning, family education services, tax planning, lifestyle management and life insurance, among other things, at an increasing rate. For instance, the survey found that, as of the end of 2017, 80% of RIAs offered charitable planning, up from 63% in 2013, while family education services as of 2017 were offered by 72% of firms compared with 56% in 2013.

Move Toward Independence Expected to Continue

RIAs are also leveraging technology at a greater pace, which is helping expand their assets under management. Using technology in the back office to automate procedures frees up advisors to focus on clients and the acquisition of new ones.

Beatty also noted that RIAs are modernizing their websites and using digital channels such as social media to get the word out about their business. “It all goes back to documenting your marketing strategy and understanding the client so that you are putting the message into the channel that resonates with that ideal client,” said Beatty. “The independent model is resonating with individual investors. Though market share acquisitions, traditional advisors are seeing the opportunity to move to independence at an accelerated pace.”

Source: Read Full Article