Last year was undoubtedly a strong year for registered investment advisors. Firms grew assets by over 13% from both new and existing clients, and client retention was at 97%, according to the self-reported data in Charles Schwab's 2021 Benchmarking Study.
What contributed to that success in a trying year? Beyond the market growth, it was firms being forced to turn to digital-oriented marketing and communications strategies with clients during a year of lockdown.
“ created an atmosphere of innovation and experimentation that really helped advisors reimagine how they engage with clients and prospects; how they engage with their own teams; how they onboard talent,” said Lisa Salvi, managing director of business consulting and education at Schwab Advisor Services.
Greater emphasis was placed on digital strategies, like attracting new clients through a firm’s digital channels and meeting current clients remotely. When Schwab asked participants to rank their top strategic initiatives, digitals initiatives came in fifth place. Just a year ago, it ranked at number 10.
Firms leaned into the websites, email campaigns and social media. About a third of participants tried webcasts/webinars, virtual events and podcasts for the first time. More than two-thirds of participants generated leads via online ads, webcasts, virtual events, emails and their websites.
“We did pivot to webinars and webcasts: some of them were more technical, so they were our analyst or chief investment officer talking about markets or financial planning, and then some of those were more lifestyle related,” said Scott Wood of his Dallas-based $2.3 billion firm, True North Advisors.
Fort Worth, Texas–based Aspen Wealth Management which manages over $185 million in AUM, gets half of its prospects from Google searches. Subsequently, the team thought it would be better to break down its blog posts into short and daily podcast episodes. “Thinking about how people are starting to search, they’re using more voice, so we want to be optimized for voice,” Aspen’s founder, Helen Stephens, said.
The study found many firms will continue to incorporate more virtual and digital initiatives into their client interactions. Aspen Wealth has been holding virtual meetings with clients who reside in the same city despite states allowing people to gather.
The Schwab report also found positive compound annual growth rates for all sizes of firms and forecasts median assets under management increasing twofold in 2025, up from $439 million in 2020. AUM could reach $791 million if registered investment advisory firms hold on to the 12.5% CAGR that occurred between the close of 2015 and 2020, and $1 billion by 2027, said Salvi.
The 1,340 advisory firms, managing an aggregate $1.5 trillion in client assets, that participated in the study predict median revenues would grow nearly 50% to $3.79 million by 2025 and client head count would go up by 30% from 298 to 383.
Consequently, median firms (those with $25 million in AUM or more) would need to hire more people to support the growth. Between the end of 2015 and 2020, median firms doubled their staff to shore operations up, said Salvi.
As an example, in the past nine months, Wood said he hired 10 new advisors. Stephens of Aspen Wealth Management increased her staff head count by three to prevent any “bottlenecks in our financial planning process” as they managed around a 30% increase in net new assets, she said.