RIA Average Client Size Jumps $200K
Since 2012, RIAs’ median assets under management have grown at a 10% five-year compound annual growth rate, according to Schwab’s 2017 RIA benchmarking study, which focused on firms with $250 million or more. The median assets under management at RIAs were $593 million last year, Schwab found. Average client size, meanwhile, has jumped from $1.6 million in 2015 to $1.8 million in 2016, according to the study.
Jonathan Beatty, senior vice president of sales and relationship management at Schwab Advisor Services, attributes continued growth in the space to the popularity of the RIA model among high net worth investors with sophisticated financial planning needs as well as to RIAs making appropriate strategic decisions when it comes to retaining and attracting new clients.
But the study also found that the fastest-growing RIAs are also the ones attracting the most new clients through referrals. Among the top 20% of the firms in the study by growth, referrals were responsible for 5.8% of the growth in new assets, compared to 2.7% for all other firms.
The fastest-growing firms engage in additional marketing-related activities aimed at attracting new clients, such as community involvement, seminars and networking, according to the study’s authors. Such strategies were behind a further 3.6% of new asset growth at the fastest-growing RIAs, Schwab found. These RIAs were able to bring on a median of 31 new clients last year, or about 1.5 times as many as the rest of the space, according to the study. And the median assets of these clients were $45 million, compared to $23 million at their slower-growing competitors, Schwab found.
The size of the assets of the new client, however, may have something to do with the size of the firm. Schwab found the largest firms work with the largest clients. Average client size at RIAs with more than $2.5 billion in assets under management was $3 million, according to the study. At firms with $100 million to $200 million, average client size was $1 million, Schwab found.