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How the Fastest-Growing RIAs Are Gaining New Clients

By Rita Raagas De Ramos July 12, 2018

The fastest-growing RIAs are making headway in attracting and signing new clients by focusing on a niche set of prospects, according to the results of the 2018 RIA Benchmarking Study from Charles Schwab.

Jonathan Beatty, San Francisco, Calif.-based senior vice president for sales and relationship management at Schwab Advisor Services, says the concept of having an ideal client is important because it enables RIAs to understand how their offerings best fit the type of investor they are looking for, helping the firms deliver customized services.

“As consumers, we all want curated experiences that speak to us,” Beatty says.

An example of the ideal client concept is a California-based RIA’s focus on “wine lovers” as clients.

Those wine lovers “want experiences around wine because that’s part of their lifestyle,” Beatty says. “The firm can create not only investment management offerings but also experiences to fit that lifestyle.”

Beatty says each of the fastest-growing RIAs has their own definition of an ideal client.

“What’s really the secret about this is not what the ideal client is, but that the firm knows what their ideal client is,” he says. “The firms that have formalized a written ideal client persona tend to then develop the best kind of services that generate more new clients and more assets from those new clients.”

And the fastest-growing RIAs try to deliver their message – whether it’s their experience or offerings – to clients and prospects through strategic communication channels, Beatty says.

Slightly more than half, or 51%, of the fastest-growing RIAs have a targeted “ideal client persona” for whom they offer a specific “client value proposition," according the study. And the RIAs that do this gained 26% more new clients and 41% more new client assets in 2017 compared to firms that don’t have niche client targets.

The fastest-growing RIAs are also strengthening their brand, investing in their personnel and maximizing the use of technology, according to the study.

“Independent advisors have certainly enjoyed buoyant investment returns but have also grown their businesses organically and strategically, which positions them well for sustainable growth even in the face of market volatility,” Beatty says.

The net asset growth of organic or existing clients contributed 13.6% to the fastest-growing firms’ total client assets growth in 2017, sharply higher than the 5.6% to all the other RIAs surveyed.

The median number of new clients in 2017 was markedly higher for the fastest-growing firms (36) compared with all the other firms surveyed (19).

The fastest-growing firms also gained twice the assets from new clients at the median ($48 million) compared with all other firms ($24 million) in 2017.

Beatty attributes much of the organic growth of the fastest-growing RIAs to their efforts to differentiate and market their value propositions, improve the client experience and strategically expand their service offerings to meet the needs of their ideal clients.

For more than a decade, Charles Schwab has been studying the growth of the fastest-growing RIAs by examining the top 20% of RIAs in terms of client assets. For this latest study, it surveyed 1,261 RIAs from January to March. Charles Schwab determines the fastest-growing RIAs by measuring the firms’ five-year compound annual growth rate (CAGR) in AUM. All the firms surveyed have at least $250 million in AUM.

For first time in the study’s 12-year history, the average assets per client of the RIAs surveyed surpassed $2 million.

The study shows that the RIAs’ median AUM grew 16.2% in 2017, sharply higher than the 9.6% growth in 2016. And Beatty expects the growth and competition among RIA firms to heat up.

“With the success of this industry comes more competition and the firms who thrive are those who effectively amplify their brands, invest in their people, focus on best practices and deploy the right technology to drive operational excellence and an optimal client experience,” Beatty says.

Around 46% of the fastest-growing RIAs created a marketing plan in 2017, while 49% had a marketing budget, according to the study. Those firms used marketing channels to help them grow their client base – 62% used email newsletters, 58% used social media and 22% used videos.

“As firms are professionalizing many aspects of their deliverables to clients, marketing is one of them,” Beatty says. “They are accentuating their voice in the marketplace, broadcasting their reputations.”

Meanwhile, nearly three-quarters, or 73%, of the fastest-growing firms are planning to hire in the next 12 months. Around 80% of the fastest-growing RIA firms plan to add relationship managers, while 65% plan to hire administrative staff. And the largest RIAs, with at least $2.1 billion in client assets, plan to hire more aggressively.

Around 41% of the RIAs recruited from other RIA firms in 2017, according to the study.