In Practice October 4, 2007

Independent Advisers Experience Significant Business Growth in '06

Independent registered investment adviser (RIA) firms' assets under management grew a median of 20% in 2006 and revenues increased at a median rate of 16% during the same period, according to Schwab Institutional.
Reported by

Schwab’s RIA Benchmarking: Growth Trends Study also found that between 2003 and 2006, participating firms grew their client base by 8% annually, with the average client size increasing 42% to $1.04 million.

“Independent advisers are experiencing phenomenal growth and the future remains very bright, because asset and revenue growth are far exceeding client growth, which should lead to increased firm profitability,” said David Welling, Schwab Institutional vice president of marketing and adviser business management, in a press release.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

Growth Sources

The largest source of asset growth is new clients, the study found. More than 50% of participating firms’ asset growth came from new clients, and 88% of those new clients were generated from either existing client (59%) or professional (29%) referrals. More than 80% of firms reported having at least one professional referral relationship, with CPA firms (72%) and law firms (64%) being most common.

While almost every firm generates new business from referral sources, some firms are significantly more successful, the survey revealed. The top 20% fastest growing firms, excluding investment performance, generate two to three times the number of referrals as the typical firm.

Seventy-six percent of advisers said they are satisfied with the growth they have experienced, and 82% plan to grow in the future. However, 32% of advisers said they have at least one major barrier to growth and more than 75% reported they have at least one major or minor roadblock to growing. The number one barrier to growth cited is finding adequate time to dedicate to business development, an issue with 45% of participating firms.

Challenges

Thirty-five percent of firms participating in the study reported that hiring talent was a key challenge, ranking it the second biggest barrier to growth and firm productivity. According to the study, advisers indicated that managing the growth and maintaining service levels to existing clients often did not leave enough time to focus on staff or plan for future growth.

Advisers expressed confidence in their abilities to serve clients and deliver advice. Seventy-four percent of firms said client service was an enabler to growth, and 72% reported that once a prospect was identified, closing the deal was a one of the firm’s strengths. Ranking third on the list of self-reported adviser strengths was investment returns, with 70% of advisers saying that was a positive for them in terms of growth.

Schwab Institutional’s RIA Benchmarking: Growth Trends Study provides each participating adviser with a customized Peer Benchmarking Report that enables the firm to measure its growth, market and business development efforts, and organizational structure against peer firms who are similar in size and business model and the RIA industry as a whole. The 2007 RIA Benchmarking: Growth Trends Study is part of GrowthPoint, Schwab Institutional’s integrated practice management program for RIAs.

Data & Research October 4, 2007

Death and Taxes Not Such Sure Things for Affluent Americans

Despite worries about estate taxes, many Americans with significant savings have not taken adequate steps to plan their estate.
Reported by

A new survey from The Hartford Financial Services Group, Inc., indicates affluent Americans, especially those with more than $2 million in net worth, are more concerned than a year ago about their families having to surrender significant chunks of an estate to federal taxes. However, nearly 40% have not taken any steps to plan their estates, and one in three said they do not know where to start.

Estate tax concerns rose in proportion to survey respondents’ savings, according to a press release about the survey results. Compared to the average 49% who expressed greater concern than a year ago about the estate tax, 56% of those with more than $2 million in assets and 73% of Americans with $5 million or more in assets said their fears were rising.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Top causes of concern cited by respondents were: increase in their net worth (65%), the growing federal budget deficit that might imperil any estate tax cuts (47%), and a sense that the new Congress is less likely to repeal or reform the tax (41%).

A majority of those surveyed (54%) indicated they had taken steps to plan their estate, but a large number (37%) indicated they had not, the release said. The survey found 34.3% were unsure about where to start and approximately half had not yet found the time to put their estate in order.

Of those surveyed who had begun to plan their estate:
• 81% had written a will,
• 68% had talked to family members about their intentions,
• 63% had created a Power of Attorney or Living Will,
• 51% had created a Living Trust,
• 40% had purchased life insurance for estate liquidity or to pay estate taxes,
• 22% had created an Irrevocable Life Insurance Trust, and
• In planning their estate, 74% worked with an attorney, 47% worked with an accountant, and 28% worked with an insurance agent.

More information about estate planning is available at hartfordinvestor.com.

«

Close