July 18, 2012
--- Independent advisers are scanning the horizon
for new clients to maintain growth in an uncertain economy, Charles Schwab’s
benchmarking study found. ---
Independent registered investment advisers (RIA) reported record
levels of assets under management (AUM) and revenues in 2011 driven by new
clients that offset the year’s flat market performance, according to the 2012
RIA Benchmarking Study. The average RIA firm increased revenues by 12% and AUM
by 3.8%, marking a second consecutive year of record highs for the industry.
New client growth came in at 4.7% at the median—in terms of new
clients net of client departures—flat from last year but up from 3.5% in 2009.
When looking only at new clients in the door, firms grew by 8.2%, while the 20%
of firms bringing in the most clients added new clients by 14.7% or more.
Alongside the growing numbers of new clients, RIAs marked a second
consecutive year of rising client retention rates, maintaining more than 97% of
existing clients in 2011.
While revenues and assets are up, satisfaction with growth the
past three years was down slightly at 67%, from 69% in 2010. The new figures
are more consistent with 2009 levels (65%), and may be attributed to longer
sales cycles by RIAs. Advisers are staying focused squarely on growth as they
look ahead: 55% said their No. 1 initiative in 2012 is expanding their firm,
and 84% have an initiative related to growth among their top three priorities.
Maintaining quality of client service (81%), closing new client
business (74%), implementing new technologies (63%), and maintaining efficient
operations (61%) were cited as the most important keys to growth.
A growing percentage of firms say inadequate strategic planning
and execution are blocking growth (28% vs. only 19% in 2007). A number of firms
have switched their highest priority initiatives away from marketing and
business development and instead are prioritizing strategic planning. Overall,
one in seven had strategic planning or succession planning as their top special
initiative in 2011, where only one in ten did in 2010. Still, only 42% of firms
have a written strategic plan in place.