Three keys to advisor success in a year of change

Article

August 13, 2021

By Lisa Salvi, Managing Director, Business Consulting & Education, Schwab Advisor Services

Disruption breeds change. For RIAs, 2020 turned out to be a catalyst for innovation that pushed most to adapt their core business models and reimagine the ways they engage with clients, prospects, and staff. The result? Advisory firms grew at a truly remarkable rate last year.

According to Schwab’s 2021 RIA Benchmarking Study, advisors saw revenue increase 7.5% and assets under management (AUM) rise 14.5% year-over-year at the median.This rate of AUM growth was higher than the five-year compound annual growth rate from year-end 2015 through 2020.

How exactly did advisors successfully navigate such a difficult year? The Benchmarking Study data shows firms focused their efforts in the following key areas:

     1. Reimagined client interactions

Advisors immediately found new ways to be there for their clients when they needed it most. They innovated early in 2020 and began to successfully manage relationships virtually. Firms reported engaging with 90% of clients completely virtually in the first quarter of 2021. Advisors are planning to continue to provide options for clients; they anticipate that 50% of clients will engage with staff completely virtually after COVID-related restrictions are lifted.

Clients responded positively. Client retention remained strong and the increase in net assets added from existing clients reached its highest point in five years: $10 million for larger firms and $2.5 million for smaller firms.ii

     2. Embraced new opportunities for business development

Advisors pivoted quickly to adopt new ways to engage prospects, with many firms trying digital marketing practices for the first time in 2020. RIAs successfully generated leads digitally, with nearly 80% of firms converting some prospects completely virtually in 2020.iii

The website became the office “front door,” and about three-quarters of all firms reported using their websites for prospecting. Unable to visit in person, many prospects went online to “meet” the team, understand the firm’s philosophy, and validate what they might have heard about the firm.

In addition to leveraging their websites, firms also relied on social media, blogs, and online advertising to attract prospects. Notably, over one-third of firms reported implementing virtual events, webcasts, and podcasts for the first time in 2020. And, over 70% of firms said they generated leads from their website, virtual prospect events, and online advertising.iv

Firms using digital tactics for prospecting

Their efforts were rewarded: More than two-thirds of all advisors met or exceeded their new client growth goals last year.v

     3. Prioritized talent acquisition to maintain growth and build capacity

As firms grew, talent acquisition, training, and retention became strategic priorities as well. In 2020, 71% of firms hired new talent, and RIAs brought on two new staff members at the median.vi

If growth continues at the current rate, the median firm represented in the 2021 RIA Benchmarking Study could reach $1 billion in AUM by 2027.vii Perhaps not surprisingly then, over three-quarters of firms are planning to hire in 2021.viii

Lisa quote

"Determining new ways to maintain firm culture will continue to be important, especially as RIAs onboard new staff remotely, navigate flexible work, adjust to client preferences, and meet high levels of growth.

I’m thrilled to see the results advisors experienced in 2020, and our teams at Schwab are committed to continuing to provide world class support for firms of all sizes."

Lisa Salvi, Managing Director, Business Consulting & Education, Schwab Advisor Services
Lisa Salvi

End

 

Advisors can learn more about the insights from our annual RIA Benchmarking Study here.


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[i] For all firms with $25 million or more in AUM.

[ii] “Smaller firms” refers to firms with less than $250 million in AUM, and “larger firms” refers to those with $250 million or more in AUM. Median results unless otherwise noted.

[iii] Based on firms that converted one or more prospects into clients completely virtually in 2020.

[iv] Based on firms that track leads and indicated generating one or more leads from tactic.

[v] Based on firms that track their progress toward new client goals.

[vi] Results for all firms with $250 million or more in AUM.

[vii] For all firms with $25 million or more in AUM. Anticipated increase based on projecting out year-end 2015 through 2020 AUM compound annual growth rate.

[viii] Results for all firms with $250 million or more in AUM.

 

Past performance is not an indicator of future results. The 2021 RIA Benchmarking Study from Charles Schwab was fielded from January to March 2021. Study contains self-reported data from 1,340 firms that custody their assets with Schwab Advisor Services or TD Ameritrade and represent over $1.5 trillion in AUM.

Schwab Advisor Services™ serves independent investment advisors and includes the custody, trading, and support of Schwab.

Independent investment advisors are not owned by, affiliated with, or supervised by Schwab. For informational purposes only.

Charles Schwab & Co., Inc. (“Schwab”) is a separate but affiliated company and subsidiary of The Charles Schwab Corporation (“Charles Schwab”).

TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA / SIPC, is a subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank.

©2021 Charles Schwab & Co., Inc. (“Schwab”) All rights reserved. Member SIPC.