Data & Research July 20, 2015

Investors Say They are Partners with Their Financial Advisers

More than a third say their adviser’s recommendations have boosted their investments substantially.
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Nearly 70% of investors say they are partners with their financial advisers when making financial decisions, according to the second-quarter John Hancock Investor Sentiment Survey, a quarterly poll of affluent investors.

However, only a quarter accept their adviser’s recommendations. Among those who have listened to their adviser, 34% say the value of their investments has increased substantially due to their adviser’s recommendations.

The primary reason investors work with an adviser is to manage their investments, cited by 70%. Two-thirds have a financial adviser to develop a retirement plan, 50% to produce a comprehensive financial plan for major life events and goals, and 20% rely on their adviser to make recommendations in the event of death, disability, critical illness or other risks.

As to how they would like to interact with their adviser, 70% say face to face, with nearly as many indicating speaking over the telephone. Only 5% want to communicate with their adviser via text messages, 2% over video chat, and less than 0.5% through social media or podcasts. Asked how their association with their financial adviser could be improved, 30% say more in-person interaction and 20% say regular electronic updates about their account.

Greenwald & Associates conducted the survey for John Hancock among 1,064 investors from May 11 to May 22. To qualify, respondents had to participate in their household’s financial decision-making process, have a household income of at least $75,000 and assets of $100,000 or more.

Data & Research July 20, 2015

Registered Investment Advisers’ Profits Hit All-Time High

Schwab’s 2015 RIA Benchmarking Survey finds 42% of RIAs have doubled their revenues since 2009.
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Registered investment advisers’ (RIAs) revenue and profits have hit all-time highs, according to Charles Schwab’s 2015 RIA Benchmarking Study. Forty-two percent of RIAs have doubled their revenue since 2019, with half of all firms increasing their assets under management by 75% in the same time period. This represents a compound annual growth rate (CAGR) of 12.1%.

In addition, profitability has risen 36% over the past five years and now stands at 27% for the median firm.

Adding new clients is a clear goal for RIAs, cited by 82% of RIAs as one of their top three priorities. Over the past five years, the number of new clients has surged by more than 24% for half of RIAs. In 2014 alone, the median firm grew its client base by 5% or more, and top-performing firms expanded their client base by 10% or more. Firms are also taking on larger clients, with the average account size $1.9 million. Among top-performing firms, it is $3.9 million. RIAs also have a median client retention rate of 97%.

The combination of new clients and larger account sizes has help boost RIAs’ revenues. Since 2009, the
RIA’s CAGR now stands at 13.6%; among top-performing firms, it is 18.8%. The median firm reported $554,000 in revenue per professional, while top-performing firms reported revenue of more than $800,000 per professional.

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“More than half of the RIA firms in the study are now embarking on their third decade in business, and the data shows that they are doing so from a position of competitive strength,” says Jonathan Beatty, senior vice president, sales and relationship management at Schwab Advisor Services. “As RIAs and the industry at large continue to mature, firms are learning from each other and sharing best practices to help build scale and fuel growth. The independent model is clearly winning today among high-net-worth investors, and RIAs are also preparing themselves to capture future opportunities.

Schwab’s RIA Benchmarking Study is its ninth annual report. It is based on responses from more than 1,000 firms collectively managing $750 billion in assets. More information is available here.

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