Independent advisory firms continue to experience tremendous growth across nearly every key performance indicator. But some firms are achieving superior results. These firms understand that as they grow, the way they strategically approach key inflection points requires different decisions, but the fundamentals remain the same. They adopt an innovative mindset, show a willingness to change, and seek new ways to operate their business. And, they adopt a key set of guiding principles that they refer to year after year as they set strategies that propel their firms to new levels of growth and success.

Firms are seeing strong growth— and there’s a subset that outperforms.

AUM (assets under management) CAGR (compound annual growth rate)

16% AUM CAGR$731M80th percentile

7% AUM CAGR$486M 20th percentile

11% AUM CAGR$587M Median

2013 2017

Guiding principles for advisory firm success

Growing your firm requires focus, strategic planning, and an innovative mindset. Establishing a shared vision for the future, creating alignment, and driving effective execution power your growth engine and provide a clear understanding of the future and how you’ll get there.

Effective planning and execution is a leading indicator of success

As firms grow, they are more likely to engage in strategic planning.

$250M-500M

51%

$500M-1B

64%

$1B+

69%

Fastest-growing firms with $250M+ in AUM tend to have a written strategic plan.

Fastest-growing firms

64%

The vast majority of fastest-growing firms regularly review their strategic plans as they evolve their strategies.

of fastest-growing firms review their strategic plan at least annually

87%

Firms thrive when focusing on the client experience from the clients’ point of view. When every person, process, service, and system maintains an extreme focus on your ideal client, you are able to better differentiate your firm in an increasingly competitive landscape.

Every aspect of the firm is designed around the ideal client and what they value.

People• Recruiting and hiring• Talent development• Incentives and rewards• Employee ownership

Systems• Client relationship

management• Reporting and billing• Planning• Trading

Services• Investment management • Value-added services • Relationship management

Processes• Operational workflows• Client on-boarding• Client meetings• Compliance• Cybersecurity

Value is defined through your clients’ eyes

Increasingly, advisors are expanding value-added services to differentiate their client experience.

Firms who have documented their ideal client persona and client value proposition earn significantly more new clients and new client assets than those without these strategies.

Delivering an experience their clients value enables firms to continue to win in the marketplace.

Fastest-growing firmsAll other firms

2013 2017

12.4%CAGR

5.1%CAGR

428

329

219

268

# of

clie

nts

4 out of 10 expect to offer tax planning, charitable planning, and non-financial services, such as health care planning1

+41%

More new client assets

+26%

More new clients

Operational excellence creates greater capacity for clients

Institutionalizing your business through technology and operations provides operational discipline allowing you to maximize scalability, manage risk, and build a solid infrastructure so that you can reinvest time where it matters most—with your clients protecting the trust that you have built.

Best-managed firmsAll other firms

Productive advisory firms are able to serve more clients representing greater AUM, yet spend less time per relationship.

49

Clients per professional

62

$77M

AUM per professional

$112M

34

Hours per client for client service

28

Operational discipline is also about protecting the firm. Among firms with $250M+ in AUM, strengthening their cybersecurity programs continues to be a focus.

52% 58% 58%

90%

Client education

Cybersecurity consulting

Cybersecurity insurance

Employee training

Firms are increasingly leveraging technology and integrating solutions that drive efficiency.

Use standardized workflows within their CRM

60%

Integrate one or more data sources or systems with their CRM

83%

CRM (client relationship management)

Every aspect of your firm—employees, centers of influence, clients, and even your digital presence—should effectively amplify your firm’s reputation within the community you serve, in a way that increases referrals and generates new business.

Your reputation is your brand

Referrals continue to be the leading source of new clients.

75% of new clients came through referralsfrom existing clients, business partners, or other professionals.

Fastest-growing firms added twice as many assets from new clients by effectively employing a broader set of marketing tactics.

Fastest-growing firms use a strong digital presence to communicate their value.

$250M+ AUM

Fastest-growing firms

Social media

Email newsletters

Website

65%59%

68%62%

84%81%

2.2x more growth

9.1%

4.2%Other marketing

Professional referrals

Client referrals

People are your most important asset

Creating a cycle of opportunity to attract and retain top talent helps ensure continuity of your firm’s people, culture, and values as you prepare for the future. That’s why having a high-performing and diverse team, unlocking their potential, and rewarding and developing the next generation of leadership is a long-term commitment and critical to building a legacy.

With most firms planning to hire in the next year, finding the right employees could be a challenge.

of firms are planning to hire in the next 12 months73%

Staffing and compensation account for 73% of a firm’s overall expenses.

Outperforming firms create an effective cycle of opportunity to attract and grow their talent.

Cycle of opportunity

Recruit and hire quality talent

Effectively incentivize and reward

Talent development

Define path to equity ownership

The competition for new talent is fierce as firms recruit from multiple sources.

41% Other RIAs

20% Bank or

trust 14% IBD

14% Wirehouse

RIA (registered investment advisor)IBD (independent broker dealer)

The power of insight For more than 20 years, the Schwab Business Consulting and Education team has been working hand in hand with RIAs, leveraging our deep expertise in core business issues to help independent advisory firms achieve their goals and gain competitive advantage.

1 Schwab Independent Advisor Outlook Study, Spring 2017.

This infographic is intended for general informational purposes only, and is not intended to provide financial, investment, regulatory, compliance, legal, or tax advice. All stats in this infographic are based on Schwab’s 2018 RIA Benchmarking Study unless otherwise noted.

The RIA Benchmarking Study from Charles Schwab was fielded from January to March 2018. The study contains self-reported data from 1,261 firms that custody their assets with Schwab Advisor ServicesTM and represent slightly over a trillion dollars in assets under management (AUM), making this the leading study in the RIA industry. This self-reported information was not independently verified. Participating firms are categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups—by AUM size. Unless otherwise noted, study results are for all firms with $250 million or more in AUM, representing the vast majority of total assets managed by this year’s participants.

Best-managed firms represent advisors in the study who are in the top 20% of qualifying firms, ranked by productivity (2018 revenue per professional), profitability (2018 standardized operating margin), revenue growth (2011–2016 compound annual growth rate in revenue), and net asset growth (2011–2016 compound annual growth rate from net asset flows). The top 20% of firms was calculated after removing those with less than $1 million in revenue or fewer than two professional staff. Best-managed firms were selected without regard to peer group, and most groups are represented in the best-managed firms group.

Fastest-growing firms are the top 20% of firms with $250 million or more in AUM as determined by 5-year net organic compound annual growth rate. Net organic growth is the change in assets from existing clients, new clients, and assets lost to client attrition before investment performance is taken into account, and it excludes the growth from acquisitions, divestitures, and advisors joining or leaving a firm with assets.

Compound annual growth rate (CAGR) calculated over the 5-year period from 2013 to 2017 for all firms $250 million or more in AUM.

©2018 Charles Schwab & Co., Inc. (Schwab). All rights reserved. Member SIPC. Schwab Advisor Services™ includes the custody, trading, and support services of Schwab. Independent investment advisors are not owned by, affiliated with, or supervised by Schwab.

JUT (0618-8TEA) MKT102583-01 (09/18)

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