Charles Schwab Study: Large RIAs Experience 17.4% Growth in Assets
Results from Charles Schwab’s 2024 RIA Benchmarking Study – which examined the trends and performance of 1,304 registered investment adviser firms representing $2 trillion in assets under management – reveal that a multifaceted approach to growth is imperative for long-term success.
“Firms can jumpstart their organic engine by being intentional in developing outreach strategies. To support growth, upskilling talent and leveraging enhanced digital capabilities that offer personalized experiences will help firms serve current clients and attract the next generation,” said Lisa Salvi, managing director, business consulting and education at Charles Schwab Advisor Services.
Firms with less than $250 million AUM, i.e., smaller firms, saw a 19.4% growth in assets last year, and firms with more than $250 million AUM, i.e., larger firms, realized 17.4% growth, according to the report.
Organic growth – defined as the change in a firm’s assets from new, existing, and lost clients before investment performance is considered, and excluding the growth from acquisitions, divestitures, and advisers joining or leaving – was central to gains in 2023. Net asset flows contributed 7.9% to AUM growth for smaller firms and 4.9% for larger firms. Driving organic growth were increases in assets from new clients, which reached the highest point in five years for both smaller and larger firms, as well as assets from existing clients, which reached the second-highest point for all firms. Client retention also contributed to healthy net asset flows.
The top performing firms saw twice as much revenue growth over the past five years as all other firms, and net asset flows contributed 12.2% to their overall AUM growth in 2023. They also attracted 83% more new clients and saw 2.4 times more new client assets, at the median, than all other firms last year.
In terms of overall compensation, financial planners near the top of the range in the 80th percentile earned salaries of $152,000 and total compensation of $216,000, while those in the 20th percentile earned salaries of $69,000 and total compensation of $80,000. Highlighted in an additional report from Charles Schwab and unpacked in third-party reporting by Citywire, overall compensation among employees of independent RIAs increased 17% since 2019 with the median annual salary being $97,000 and total compensation of $118,000 in 2023.
According to Citywire, portfolio managers reported earning a median salary of $148,000 with total compensation of $200,000. Total compensation ranged from $110,000 for the 20th percentile to $411,000 for the 80th. Senior client account managers brought in a median salary of $162,000 and total compensation of $285,000. That position ranged from a base salary of $84,000 and total compensation of $159,000 on the low end to $250,000 in salary and $565,000 in total compensation on the high end.
Notable trends highlighted in the report included:
- Expanding upmarket to help drive growth: Prioritizing the acquisition and retention of high-net-worth clients and ultra-high-net-worth clients has a significant impact on performance, i.e., 11% of clients had $5 million or more in AUM but accounted for an estimated 38% of revenue in 2023. Charles Schwab said this underscored the importance of delivering a client experience tailored to each client’s unique needs and expectations, while balancing the firm’s operational capacity and cost to serve.
- Developing talent for long-term success: With the ongoing shortage of financial advisers, there may be more hiring competition among RIAs and increased costs to recruit and retain employees. Charles Schwab said it is important for firms to provide training programs to nurture their own in-house talent. For the first time in the benchmarking study, “developing the skills of current staff” ranked as a top-five strategic initiative.
Other recommendations that rose to the top included optimizing digitization to deliver high-touch service at scale and maintaining a robust cybersecurity program to mitigate risk. Read the full study.
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