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:
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.
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.
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).
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.
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. '
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:
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