RIAs Are on a Good Run and Unlikely to Slow: Schwab
From the perspective of Charles Schwab, it’s good news for RIAs of all sizes. Most are growing their client bases, getting richer customers, boosting profits and adding assets under management.
Of course, Schwab owes a big chunk of its revenue to the independent RIAs that use its custody and technology. So it loses nothing by painting a sunny picture of the RIA space.
More than half of the 1,007 RIAs surveyed by Schwab report growing their assets by 75% or more in the past five years, while revenue has doubled since 2009 among 42% of the firms, according to ThinkAdvisor. Profitability is on the rise too, says Schwab. Standardized operating margins grew 36% in the past five years, and the median firm now has 27% profit margins, reports the Web publication.
Not all of this growth is attributable to the bull market, Jon Beatty, head of sales and relationship management at Schwab’s RIA-support unit, tells ThinkAdvisor. He says half the study participants saw new-client numbers increase by 24% in the past five years.
And clients are getting richer — the average account now holds $1.9 million — and less likely to bolt, with reporting firms having a median 97% client retention rate year-over-year. RIA-based FAs are bringing in more revenue as well. The median firm had $554,000 in revenue per advisor, according to the study.
The Schwab study concludes there’s plenty of upside in store. RIAs capture about 7% of the affluent-investor market in the U.S., Schwab estimates. “That means there’s basically $23 trillion of affluent-investor dollars out there as a market opportunity for them,” Beatty tells ThinkAdvisor.