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RIA Survey: The Best is Yet to Come

More than half of RIAs in a recent poll believe the industry will continue to grow faster than the market, and more than 90% believe that it has not yet hit its peak growth.

According to the latest Independent Advisor Outlook Study (IAOS) from Charles Schwab, registered investment advisors (RIAs) report that the bull market of the past six years has contributed positively to firm growth across areas, including:

• 23% — attracting new clients;

• 16% — providing higher advisor compensation;

• 13% — creating more capital to invest in firm growth and operations; and

• 13% — driving the consolidation of client assets (13%).

Technology Trends

Nearly half of firms said they would most likely use automated investment management to target younger, next generation investors (48%) or investors with under $100,000 in investable assets (43%). According to respondents, the benefits of using an automated investment management solution include being able to serve clients with lower minimums (29%) and being able to reduce the cost to serve certain clients (19%).

Respondents said that technology is having an impact:

• 70% — helping advisors deliver a better client experience;

• 67% — creating efficiencies that are making firms more profitable; and

• 64% — freeing advisors to spend more time with their clients.

Hiring, Training Trends

More than half of all firms are currently hiring, with larger firms ($500 million or more AUM) reporting more aggressive hiring plans (79%) than smaller firms (54%). Across firms of all sizes, adding staff in operational and support roles is the top talent acquisition priority. For larger firms, this is followed by bringing on junior advisors (23%), while for smaller firms there is an equally important focus on hiring individual tenured advisors (17%). Although firms are experiencing high employee retention rates, they are reporting that it is more challenging finding business development roles (19%) and investment professionals (16%).

As they seek to add staff, 57% of advisors consider creating a more diverse workforce (i.e., age, gender and race) as a priority, including 28% who report they have already taken action to hire diverse employees. In order to attract more diverse employees, close to half of advisors (44%) are expanding their networks to identify diverse candidates.

Informal, on-the-job training is the most common approach to training staff (88%), but firms are also supporting additional education and certifications for staff (66%) and a third of firms offer a formal in-house training program (33%). RIAs identified the biggest development needs among their staff as business development skills (26%) and training to be able to fully leverage technology in workflows (20%).

Ownership Path

Nearly one-third of firms (30%) offer equity ownership opportunities to their staff, and nearly half (49%) have a documented path to ownership, one that typically results in equity owners buying in (57%). Among firms offering equity ownership, 93% believe employees with an equity share are more likely to grow with the firm. Firms that offer ownership do so to ensure the long-term success of the firm (46%) and in order to retain the best talent (42%). Firms with more than $100 million are two and half times as likely as those under $100 million to offer equity ownership. Larger firms ($500 million or more) currently offer equity ownership more often than smaller firms (52% vs. 21%), but 37% of smaller firms report that they are looking into offering equity ownership in the future.

The IAOS results reflect responses from 629 RIAs representing $229 billion in assets under management (AUM) custodied with Schwab.

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