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Schwab Study Shows RIA Growth Continuing

By Crucial Clips     August 10, 2016
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FA-IQ, Jul. 14, 2016 

BRUCE LOVE, MANAGING EDITOR, FA-IQ: This is Bruce Love with Financial Advisor IQ, and I’m here with Jon Beatty, Senior Vice-President of Sales and Relationship Management at Schwab Advisor Services. Schwab’s RIA benchmarking study, how big is it?

JON BEATTY, SENIOR VICE PRESIDENT, SALES AND RELATIONSHIP MANAGEMENT, SCHWAB ADVISOR SERVICES: We’re really excited. Actually, this is the 10th anniversary of fielding the Schwab Advisor Services benchmarking study. We had over 1,100 advisors participate this year, and that’s the eighth year in a row that we’ve had more than a thousand advisors. We now have a decade of data that has revealed to us that it’s been an era of transformation for financial advisors.

BRUCE LOVE: How much under management do you think the total cohort is?

JON BEATTY: We see it as close to three-quarters of a trillion dollars represented through the study. We know that there was over 160 advisors in the study that managed more than a billion dollars, so whatever peer group you’re in, you can find a cohort and understand how your business is doing compared to your peers.

BRUCE LOVE: You say the results show that a stable client relationship and robust business fundamentals are driving RIA growth. How did you reach that conclusion?

JON BEATTY: Well, as in any industry, the first job is to retain clients. Through the study, we saw that advisory firms are retaining their clients in the high 90s for the fifth year in a row, 97 percent, actually. And that’s really been the catalyst for growth because once you have happy and satisfied clients, they tend to want to refer friends and family to you.

We know that professional organizations like financial advisory firms tend to grow through referrals, either from their clients or centers of influence. So, the retention of clients and the importance of adding value and helping clients be successful ultimately turns into more success for the advisory firm.

BRUCE LOVE: Jon, tell us how technology and human capital are aligning to drive efficiencies when the industry’s worried about robos taking over and being drowned in red tape from regulations.

JON BEATTY: We can see through the study that advisors are very focused on achieving more scale and efficiency in their back office. They’re looking to automate manual transactions so that they can shift their talent away to more value-added services to continue to remain competitive and drive happy, satisfied investors.

BRUCE LOVE: Let’s talk about managing growth. What’s your expectations for hiring this year?

JON BEATTY: Well, it’s been a trend that’s been happening for quite a while, robust hiring within the independent advisor space. We expect that trend to continue. The survey tells us firms that manage $500 million to $750 million, 61 percent of them are looking to hire a relationship manager next year. They’re looking to add specialization in terms of talent, professional specialization -- 80 percent of the participants want to hire somebody with a credential, either a CFA, CPA, JD. Again, that’s all about creating more value for clients and differentiation in a very competitive environment.

BRUCE LOVE: Jon, thank you very much

JON BEATTY: Thank you for the time today.