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Our take on the 2022 RIA Benchmarking Study from Charles Schwab

Charles Schwab released its annual RIA Benchmarking Study, highlighting the success factors and challenges for RIAs. The study was based on over 1,000 U.S. advice firms, representing nearly $2 trillion in Assets Under Management (AUM).


The full report is fascinating for any advice firm across the globe. We thought we’d pull out a couple of insights that we found interesting here at Lumiant.


Can we believe the headlines?


In the report, Schwab emphasizes firms of all sizes saw tremendous growth despite a challenging environment.



Over a 5-year compound annual growth rate (CAGR) from year-end 2016 through 2021, firms saw a 14.1 percent median increase in AUM CAGR. However, when compared to the S&P 500, which did 17.1 percent over the same period, the results might not have been as tremendous as Schwab makes out.


It doesn’t vary too much between size of AUM either. Firms with less than $250AUM did 14.1 percent, while those over $2.5bn did 12.2 percent. Even more worryingly, you could probably reduce Schwab’s CAGR to 10 percent as a proxy for the average portfolio mix and as a filter for inorganic growth.


The more telling number in the report is the client's five-year CAGR of 5.1 percent, but even that is likely to be inflated by inorganic growth, as acquisition activity increases and asset consolidation takes place across the industry.


What they may have been pointing to was the fact that AUM (19.5%), revenue (23.2%), and number of clients (6.2%) were up from last year. While this is a strong increase, many firms are clearly still struggling for growth.


Where is the growth going to come from?


When asked about their top growth initiatives, it was the standard focus areas: talent, client referrals and business referrals (the fact referrals remain in the top three validates the above assumption).



So where are we going to find that growth?


Not by taking clients from competitors, with Schwab revealing a median retention rate of 97 per cent. Finding the right talent is going to be extremely difficult in the current environment, with advisor shortages and retirements. Even then, it could be argued that within the available talent pool, there will only be a portion of the market that would fit your firms growth strategy and value proposition.


Looking at the Schwab report, there was significant growth in AUM from existing clients who brought in more new assets to RIAs in 2021 than in the past 5 years. However, asset consolidation will only power growth from an aging client base for so long, where decumulation and wealth transfer will play a role too.


This might be why we see more than a quarter of RIAs actively seeking to buy another RIA. Which will see valuations for firms increase, particularly for those with an engaged client book that can provide additional growth opportunities by capitalizing on life events.

At Lumiant we think the devil is in the detail of this report, which brings us to our second insight.


Understand your customer, define your CVP and market the heck out of it


When you look at the data around the top-performing firms, there is a clearly defined strategy that’s underpinning their growth - more than 10% higher than all other firms.


Almost three-quarters of top-performing firms had clearly defined their ideal customer and documented it, significantly more than the average (59%).




Do not think this is just demographic profiling, client personas are more about behavior than anything else. Like what things they find important in life, what they value, what are their common goals, and even what they like to do in their spare time.


Knowing this has amazing power and can help your firm better develop a targeted client value proposition to make your brand distinctive and differentiated. This is exactly what 73 percent of top-performing firms have done and it’s helping to refine their offer and drive their client acquisition strategies.



In fact, firms with well-defined marketing plans, ideal client personas, and client value propositions saw a 42% increase in new clients in 2021 and grew 2.5x faster than other firms, thanks to their marketing efforts and client referrals.


How Lumiant can help you grow

If you’re looking for growth, then understanding your clients is essential. Particularly at an aggregate level so you can clearly define a targeted persona and value proposition. This is where Lumiant can help because its platform transforms qualitative information about your client into quantifiable measures that you can use to paint a true picture of the ideal persona.


Even better, our memorable process is designed to engage your clients to activate them as referrers - particularly non-financial clients who aren’t going to talk about performance reports around a BBQ. They are much more likely to discuss the values you helped them work through as a couple and the financial and non-financial goals they’ve achieved under your guidance.


For those looking to use talent as their growth driver, Lumiant can help with that too. Its repeatable process enables any advisor to consistently deliver a quality experience that engages the clients. We’ve even seen some firms deploy relationship managers or lifestyle services operatives who work with the clients using our tools to work through the discovery before handing it over to the advisor to crunch the financial possibilities.


Lastly, for those who are looking at digital channels to acquire customers, our Your Life assessment can be included on your website, on landing pages, or as URLs for social posts to capture the contact information of potential prospects.


Want to find out how Lumiant can help you enhance your organic growth opportunities and increase your referral potential? You can book a demo here.

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