A new report from InvestmentNews Research and BlackRock identifies the key traits and strategies that have helped leading registered investment advisory (RIA) firms outpace their competitors. The report, entitled The 2015 Elite RIA Study, also spotlights the changes these firms are making to ensure that they retain their top spots.
The research focuses on “elite” RIAs, a relatively small group of firms that has grown significantly faster and more profitably than other firms in this market. To make the study’s elite cut, firms had to be RIA-affiliated, have more than $250 in AUM, and be ranked in the top 50th percentile in firm productivity.
Defining Characteristics
The research called out several traits that are common among elite RIA firms. These characteristics help these industry-leading wealth managers achieve greater revenue growth and profitability, operate more efficiently, and attract and retain top talent. They include: broad sets of offerings, strong organizational structures, repeatable business processes, and larger teams.
Strategies for Staying On Top
Among all firms that participated in the study, 45% cited a “lack of a marketing strategy and focus” as the top limitation to growth over the past two years. The second highest growth blocker was “inadequate client acquisition and targeting,” which was cited by 37% of participants. The research also showed that Elites are keenly aware of the impact that changing demographics and technology trends will have on their businesses.
According to the study, elite RIA firms are tackling these challenges head-on with new strategies and approaches. In general, they are focusing on improving their internal operations and maximizing their employees’ productivity. Specific strategies elite RIA firms are using to achieve these goals include the following:
- Differentiate investment management offerings – Elite RIA firms know that their investment focus, processes and superior performance give them competitive advantages that drive their success. To distance themselves from other firms, elite firms are broadening and specializing their investment management offerings. Examples include strengthening their ability to truly customize each of their clients’ portfolios, and offering more expertise in areas such as retirement, tax, and estate planning.
- Treat robo-advisors as an opportunity, not a threat – Rather than being alarmed by the growing roster of robo-advisors, elite advisors view these low-cost, automated advice platforms as potential opportunities, particularly for new client acquisition. Elite firms are evaluating how robo platforms’ automation capabilities can help them win and serve new clients such as millennial investors.
- Improve human capital management – Elite RIA firms realize that their people are their most valuable asset. To maximize their teams, these firms are adopting long-term career paths and strategic compensation plans to attract and retain the best employees. Stronger teams provide scale and sustainability, and ultimately facilitate succession – all of which increases the value of the firm.
- Focus business development efforts – Elite firms closely examine the sources of the current revenues and AUM, and assess where future growth will come from. They identify key referral and lead sources, and ways to enhance the processes that support both existing client retention and new client acquisition efforts.
- Leverage Technology More Effectively – Elites understand that the growing number of existing clients, and most of their prospective new investors, expect their customer experience to be powered by the latest technology: mobile, connected and increasingly automated. To meet these requirements, elites are upgrading their infrastructure and client-facing systems. They are tuning up their CRM systems, redesigning their websites, and becoming active with social media. They are also starting to use marketing automation technologies and develop content marketing “engines” to supplement their existing new client acquisition efforts.
The elite RIAs covered in this study didn’t always hold the lofty positions they do today. They started small, but always thought big, and had strategies that paved the way to growth.
The approaches discussed in the report aren’t exclusive to industry leaders, however. Any wealth management firm, regardless of its size, can take a page out of the elites’ playbooks and take these same strategic directions. For firms striving for elite status, checking out this new research and thinking about how they can apply the elites’ strategies in their own shops is a great place to start.
