2016 RIA Benchmarking Study from Charles Schwab July 2016 Media contact: Rob Farmer Charles Schwab 415-667-0083
[email protected]
For general informational purposes only.
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Executive summary
Independent financial advisory firms have maintained a ten-year growth trajectory despite numerous and varied investment environments.
2015 results showed that stable client relationships and robust business fundamentals drive growth, while technology and human capital increasingly align to drive operational efficiency.
In 2015, asset and revenue growth eased somewhat but remained positive. Assets under management (AUM) rose to $588 million in 2015 from $365 million in 2011, at a median compound annual growth rate (CAGR) of 9.2%. Revenues grew to $3.6 million in 2015 from $2.3 million in 2011, at a CAGR of 10.9%.
Firms added a significant number of new clients over the past five years—between 28% and 50% more at the median–while average client size increased by 22% at the median over the same period.
Despite eased growth, profitability – which grew by 27% at the median over the past five years – was driven by improvements in operational processes and technology-driven efficiencies.
Firms are looking to strategically source the best talent to propel firm success. At mid-sized firms with $500MM-$750MM in AUM, 61% plan to add relationship managers or investment professionals this year.
Firms are preparing for organic and inorganic growth opportunities to drive future growth. Thirty-three percent (33%) of firms that manage over $1 billion, and almost 25% of firms with under $1 billion in AUM, are actively looking to acquire.
1 The Cerulli Report: Advisor Metrics 2015: Anticipating the Advisor Landscape in 2020. Growth represents asset CAGR from 2005 to 2014. Median results for all firms $250 million or more in AUM, unless otherwise noted. 2016 RIA Benchmarking Study from Charles Schwab, fielded January to March 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups by AUM size. For general informational purposes only.
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RIAs continue to win in the marketplace
+9.2% CAGR1
+10.9% CAGR1
+5.2% CAGR1
$3,595
$588
350
262 $2,262
$365
2011
2015
Assets under management In millions
2011
2015
Revenue In thousands
2011
2015
Clients
1 Median compound annual growth rate (CAGR) over the 5-year period from 2011 to 2015 for all firms $250 million or more in AUM. Past performance is not an indicator for future results. Median results for all firms $250 million or more in AUM. 2016 RIA Benchmarking Study from Charles Schwab, fielded January to March, 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups, by AUM size. For general informational purposes only.
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Over half of firms doubled their AUM and one-quarter doubled their revenues since the lows of 2009
AUM
Revenues
57%
25%
15% CAGR
15% CAGR
Past performance is not an indicator for future results. Results for all firms $250 million or more in AUM. 2016 RIA Benchmarking Study from Charles Schwab, fielded January to March, 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups, by AUM size. For general informational purposes only.
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Firms of all sizes are exhibiting strong growth year after year Assets under management
8.4% 5-Year CAGR
In millions Median results by peer group (AUM) 5-Year AUM CAGR (2011-2015)
$3,588
2011 2015
9.0% 5-Year CAGR
9.2% 5-Year CAGR
10.2% 5-Year CAGR
$95
9.0% 5-Year CAGR
$600 $159
$100M$250M
$211
$347
$250M$500M
$389 $500M$750M
9.7% 5-Year CAGR
$2,195
$1,447
$853
$892
$526
$750M$1B
$1B$2.5B
Over $2.5B
Past performance is not an indicator of future results. 2016 RIA Benchmarking Study from Charles Schwab, fielded January to March, 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups, by AUM size. For general informational purposes only.
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Transformative change is occurring at firms regardless of size $487,000
$470,000
$826M
929 Clients
574 Clients
$957,000
$696,000 25.2% CAGR*
$541M
$1,662M
$270,000
$434,000 18.7% CAGR
$522M
$1,231M 100
380 Clients
726 Clients
$744,000
$390,000
$1,050M
17.0% CAGR
85 Clients
$1,178M
26.0% CAGR*
75
2011
274 Clients
$500M
$920M
Revenue per professional 5-year AUM CAGR*
Clients Beginning AUM (in millions)
2015
BPS
Clients Ending AUM (in millions)
* Indicates M&A and/or advisor join
$587,000 14.9% CAGR
2011 total professionals 2015 total professionals
Revenue per professional
1,157 Clients
$499,000
$250M
+ $517,000
484 Clients
$460M
75
330 Clients
$702,000
$371M
100
1,164 Clients
464 Clients
$478M
95
$1,738M
16.0% CAGR
Basis points on assets for $2 million relationship
90
376 Clients
$750M
$1,000M
$1,250M
$1,500M
$1,750M
Assets Under Management (AUM) Past performance is not an indicator of future results. 2016 RIA Benchmarking Study from Charles Schwab, fielded January to March, 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups, by AUM size. For general informational purposes only.
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5
Revenue growth is compounded for larger firms Revenue In thousands Median results by peer group (AUM) 5-Year revenue CAGR (2011-2015)
11.6% 5-Year CAGR
2011 $19,992
2015
11.0% 5-Year CAGR
11.0% 5-Year CAGR
11.9% 5-Year CAGR
$634
$1,160
$100M$250M
$1,408
$2,416
$250M$500M
9.2% 5-Year CAGR
$3,600 $2,302 $500M$750M
11.2% 5-Year CAGR
$5,321
$11,108
$8,258
$4,777
$2,935
$750M$1B
$1B$2.5B
Over $2.5B
Past performance is not an indicator of future results. 2016 RIA Benchmarking Study from Charles Schwab, fielded January to March, 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups, by AUM size. For general informational purposes only.
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Productivity ratios remain strong: results per professional increase with firm size 53
Clients per professional
$100M-$250M
$390,000
51
Revenue per professional
Clients per professional
$250M-$500M
$500,000
51
Revenue per professional
Clients per professional
$500M-$750M
$510,000
41
Revenue per professional
Clients per professional
$750M-$1B
$585,000
43
Revenue per professional
Clients per professional
$1B-$2.5B
$576,000
45
Revenue per professional
Clients per professional
Over $2.5B
$813,000
Revenue per professional
2016 RIA Benchmarking Study from Charles Schwab, fielded January to March, 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups, by AUM size. For general informational purposes only.
Charles Schwab Advisor Services
Productivity has driven 27% growth in profitability in last five years
Past performance is not an indicator of future results. Median results for all firms $250 million or more in AUM. Results from the 2012, 2013, 2014, 2015 and 2016 RIA Benchmarking Study from Charles Schwab. For general informational purposes only.
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Advisors are creating enduring businesses by investing in client relationships, technology, and talent Firms embrace three important ideas that allow them to grow year after year.
Institutionalize the business
Create opportunity
Focus on growth
1
Acquire new clients through client referrals
2
Acquire new clients through business referrals (37%)
3
Enhance strategic planning and execution
(29%)
4
Improve productivity with new technology
(25%)
5
Improve satisfaction for existing clients
(19%)
6
Recruit staff to increase firm's skill set/capacity (17%)
7
Make changes to org structure and roles
(44%)
(16%)
Results for all firms $250 million or more in AUM. 2016 RIA Benchmarking Study from Charles Schwab, fielded January to March, 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups, by AUM size. For general informational purposes only.
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Average number of clients is on the rise Total clients Median results by peer group (AUM)
$3,121,000
2015 Average relationship size
1,089
2011 2015
$2,272,000
792
690 $1,765,000 $1,800,000 $1,270,000 $938,000
165
257
329 267
428
439
313
183
110 $100M$250M
100-250
$250M$500M
250-500
$500M$750M
500-750
$750M$1B
750-1B
$1B$2.5B
1-2.5B
Over $2.5B
Over 2.5B
Past performance is not an indicator of future results. 2016 RIA Benchmarking Study from Charles Schwab, fielded January to March, 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups, by AUM size. For general informational purposes only.
Charles Schwab Advisor Services
Strength of the advisor-client relationship drives growth: referrals provide 75% of new assets for RIAs 2015 Net asset flow growth rates by source Average results by peer group (AUM) Existing client referrals COI referrals Other marketing M&A or advisor join
2.9% 3.1% 1.7%
1.5% 3.4%
1.8%
2.5%
2.0%
2.5% 4.6% 3.2%
1.8%
1.8%
1.6%
1.8% 1.1%
1.3% 0.4% $25M$100M
25-100
0.2%
0.3% $100M$250M
100-250
$250M$500M
250-500
1.4% 0.3%
0.5% $500M$750M
500-750
$750M$1B
750-1b
0.6% Over $1B
Over 1b
“Referrals provide 80% of new assets for RIAs” is for all firms with $100 million or more in AUM. 2016 RIA Benchmarking Study from Charles Schwab, fielded January to March, 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups, by AUM size. For general informational purposes only.
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Firms are focused on talent acquisition to propel firm success Firms planning to add relationship managers or investment professionals in 2016
54%
60%
61%
79%
97%
$100M-$250M
$250M-$500M
$500M-$750M
$750M-$1B
Over $1B
Firms planning to add support and administrative staff in 2016
58%
64%
57%
64%
91%
$100M-$250M
$250M-$500M
$500M-$750M
$750M-$1B
Over $1B
Firms planning to add dedicated management in 2016
8%
4%
7%
4%
9%
$100M-$250M
$250M-$500M
$500M-$750M
$750M-$1B
Over $1B
Results by peer group (AUM). 2016 RIA Benchmarking Study from Charles Schwab, fielded January to March 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups by AUM size. For general informational purposes only.
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Growth increases demand for unique qualifications and capabilities
Chief Compliance Officer
Chief Operating Officer 47%
Over $1B
32%
$500M-$1B $250M-$500M
29%
$500M-$1B
20%
$250M-$500M
14%
Under $250M 7%
Under $250M 6%
Chief Investment Officer
Operations Director 74%
Over $1B
38%
$500M-$1B
$250M-$500M
37%
$250M-$500M
22%
67%
Over $1B
$500M-$1B
Under $250M
55%
Over $1B
Under $250M
26% 21% 10%
Results by peer group (AUM). 2016 RIA Benchmarking Study from Charles Schwab, fielded January to March 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups by AUM size. For general informational purposes only.
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2016 study includes 1,128 RIA firms representing nearly three-quarters of a trillion dollars in assets under management Peer Groups All firms $250MM+
$100MM$250MM
$250MM$500MM
$500MM$750MM
$750MM$1B
$1B$2.5B
Over $2.5B
$588
$159
$347
$600
$853
$1,447
$3,588
9.2%
10.3%
9.2%
9.0%
9.7%
9.0%
8.4%
$15
$6
$11
$14
$25
$51
$43
5.4%
6.9%
5.6%
4.5%
5.3%
5.6%
3.9%
$3,595
$1,160
$2,416
$3,600
$5,321
$8,258
$19,992
10.9%
11.9%
11.0%
9.2%
11.2%
11.0%
11.6%
350
165
257
329
428
690
1,089
5-year client CAGR1
5.2%
6.5%
5.2%
4.8%
5.6%
6.1%
5.2%
Average account size ($M)
$1.60
$0.93
$1.27
$1.85
$1.76
$2.17
$2.96
Standardized operating margin
27.2%
22.0%
26.8%
29.4%
30.1%
26.0%
27.0%
21
15
19
22
25
24
24
Metrics (median) 2015 Ending AUM ($M) 5-year AUM CAGR1 2015 Organic growth2 ($M) 5-year organic growth2 CAGR1 2015 Revenues ($000) 5-year revenue CAGR1 2015 Ending number of clients
Age of firm (years)
1 Median compound annual growth rate (CAGR) over the 5-year period from 2011 to 2015. Past performance is not an indicator for future results. 2 Organic growth from net asset flows is the change in a firm’s assets from new, existing, and lost clients before investment performance is taken into account, and it excludes the growth from acquisition or divestitures, and from advisors joining or leaving. Median results by peer group (AUM), unless otherwise noted. 2016 RIA Benchmarking Study from Charles Schwab, fielded January to March, 2016. Study contains self-reported data from 1,128 firms. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups, by AUM size. For general informational purposes only.
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Methodology & Disclosures
For general informational purposes only. This information is not a recommendation or endorsement of, referral to, or solicitation on behalf of any investment advisor, whether or not named, quoted, or described in this deck. Past performance is not an indicator of future results. Schwab designed the RIA Benchmarking Study to capture insights in the RIA industry, based on study responses from individual firms. The 2016 study provides information on such topics as asset and revenue growth, sources of new clients, products and pricing, staffing, compensation, marketing, technology, and financial performance. Fielded from January to March 2016, the study contains self-reported data from 1,128 firms that custody their assets with Schwab Advisor Services and represent nearly three-quarters of a trillion dollars in AUM, making this the leading study in the RIA industry. This self-reported information was not independently verified. Since the inception of the study in 2006, more than 3,000 firms have participated, with many repeat participants. Participant firms represent various sizes and business models. They are categorized into 12 peer groups—seven wealth manager groups and five 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. © 2016 Charles Schwab & Co., Inc. (Schwab). All rights reserved. Member SIPC (www.sipc.org). 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. (0716-2657)
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