Schwab’s 2024 RIA Benchmarking Study: Top Highlights, Insights, and Opportunities

What separates ‘Top Performing’ advisory firms from everyone else? Is it their size and scale that affords them the ability to deliver more specialized services and market themselves more effectively? Is it the quality of their advisory teams? Is it their ability to get the most out of technology?

According to Schwab’s latest RIA Benchmarking Study, the answer is all of the above and more! As you can see below, the relative outperformance of top-quintile firms is striking:

• 15.3% vs 5.8% net asset flow CAGR 
• 17.6% vs 8.3% revenue CAGR 
• 12.6% vs 4.6% new clients CAGR

So, let’s examine what specific factors enable these select firms to outperform their peers by two to two-and-a-half times across all significant metrics.

ORGANIC GROWTH FOCUSED

A rising tide lifts all boats. Driven by strong market performance (the average 60/40 portfolio returned 17.2% for the year), 2023 saw solid asset gains in assets and revenue across the RIA industry. But this increase wasn’t solely market-driven; much of it was organic growth. And once again, top performers excelled – gathering 4.5x more assets than average firms.

Top-performing RIAs gathered 4.5x more assets from existing clients than their peers in 2023.

The study notes several key strategic commitments that appear integral in helping these select firms outperform, including:

• Compelling referral plans: Referrals are the leading growth driver, accounting for more than two-thirds (67%) of new clients and net new assets. Not surprisingly, top-performing firms are more than 30% more likely to have a well-documented referral plan for their existing clients and 35% more likely to have a documented referral plan for centers of influence (COIs).

• Robust client feedback mechanisms: Firms that collect feedback during client interviews gain 26% more assets from existing clients. Not surprisingly, top-performing RIAs are 43% more likely than their peers to conduct regular client surveys.

• Segmented marketing plans: Top performers document ideal client personas, clearly define client value propositions, and establish structured marketing plans – enabling them to attract 67% more new clients and new client assets than firms that overlook one or more essential marketing tools.

• Robust lead tracking: The median lead conversion rate for RIAs that conduct careful lead tracking was 50% in 2023. Across all measurable metrics, top-performing RIAs do a better job of lead tracking (e.g., 43% more likely to track the status of prospects in their sales funnel and 56% more likely to track lead conversion).

Schwab highlights in their study that effective planning and execution are key drivers of growth, but they demand clear focus, strategic foresight, and an innovative approach. The growth engines of top-performing firms are fueled by a shared vision for the future, strong alignment, and consistent execution, providing a clear roadmap for sustained success.

PRIORITIZE TALENT ACQUISITION AND RETENTION

Firm growth, especially among top-performing RIAs, requires a greater focus on attracting and retaining top performers. Industry growth has translated to strong hiring activity. Over the past five years, 75% of firms have hired new staff—a rate expected to be matched in 2024 and beyond.

In fact, over the next five years, the average RIA firm will need to hire four new roles, while top-performing firms will add seven new roles on average—translating to more than 70,000 new industry hires (not including attrition or retirement replacements).

Given this awareness, a growing number of firms are devoting more time, attention, and resources towards both talent retention as well as addressing current and future talent gaps:

• Developing capabilities and skillsets of team members is a Top 5 strategic priority for the first time in the benchmarking study’s history

• 76% of firms reported offering career path/progression opportunities to keep employees engaged

• More firms are realigning their employee value proposition (EVP) to better resonate with current and prospective employees

As regards the last bullet above, it’s interesting to note that top-performing RIAs are 58% more likely to have a documented EVP (i.e., a set of tangible and intangible offerings the firm provides team members in return for the skills and experiences they bring to the business) than their peers.

These top performers realize that people are by far their most important asset and set about creating “a cycle of opportunity to attract and retain top talent” that will ensure the continuity of the firm’s people, culture, and values. Now’s the time to intensify your focus on building a high-performing and diverse team, unlocking their full potential, and adequately rewarding and developing the next generation of firm leaders.

DELIVER A MORE HIGH-TOUCH EXPERIENCE

The Schwab study shows the widespread adoption of digital tools and processes to automate operations and facilitate scalable growth, creating more capacity for firms to offer a more tailored client experience.

Nearly all firms rely on technology to help automate processes. 99% use a portfolio management system, 97% have a CRM system, and 93% have a financial planning system. However, top-performing RIAs (heavier adopters of digital tools and workflows) spend 25% less time annually per client on operations and about 10% more time per client on service.

Top-performing RIAs are 25% more likely than their peers to use their CRM as a central hub to serve clients more consistently.

The study notes that “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 to reinvest time where it matters most—with your clients protecting the trust you have built.”

But this drive towards digitization is only half the equation. Technology must be combined with a thoughtful client segmentation strategy for a genuinely high-touch client experience that better aligns revenue with ‘cost to serve and support. '

Once again, this is an area where top-performing RIAs excel – as they’re 28% more likely to have a documented client segmentation strategy that defines the client experience and how it’s delivered consistently and efficiently among each segment of clients. Segmentation and technology can also help pursue the next generation of clients (relationships with tremendous future upside) by:

• Facilitating engagement with the 2^nd and 3^rd generation of current clients

• Building a more diverse team of firm talent to reflect young investors better

• Offering educational tools to help build financial literacy

Never forget that ‘value’ is highly subjective but always defined through each client’s individual lens. And top-performing RIAs thrive because they focus on the client experience from the client’s rather than their point of view. Only when every person, process, service offering, and system is aligned and focused on your ideal client will you be able to differentiate your business successfully.

Here are four coaching questions for your leadership team to consider based on Schwab’s 2024 RIA Benchmarking Study:

1. How can you further optimize your referral and client feedback strategies to drive greater growth, ensuring you attract the right clients and deepen relationships with existing ones?
2. As you prepare for future growth, how can you refine your talent acquisition and retention strategies to fill roles and build a sustainable, high-performing team that can evolve with the needs of your firm?
3. How might you leverage technology and operational efficiency to create a more personalized and high-touch client experience while continuing to scale your services effectively?
4. How can you better define and document your client segmentation strategy to ensure that you consistently deliver value to your clients, primarily as you pursue the next generation of clients and investors?

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