Productivity among advisors is rising and a battle for talent is strong - these are two take-home points from the annual benchmark study of the study from Charles Schwab.

A national study of registered investment advisors by Charles Schwab, together wielding $1.1 trillion of client money, showed that the fastest growing firms chalked up a 9.3 per cent rise in client numbers and grew assets under management by 6.5 per cent. The report showed that firms' advisors are becoming more productive and serving more clients per advisor.

The fastest-growing clients in the study are defined by those in the top 20 per cent of firms ranked by organic growth.

New clients drove more than five times the new assets compared with net assets from existing clients, the Schwab Benchmarking Study, issued annually, said yesterday. The study is based on views gathered from 1,310 advisory firms.

Firms are hunting for talent in a competitive marketplace: 71 per cent of firms hired staff in the past 12 months, the report said. Some 42 per cent of firms recruited from other RIAs.

In a sign of how incentives are structured to bind in recruits, the report also showed that 72 per cent of firms share equity with non-founders. Respondents to the study said the main reason is to retain talent.

Among other findings, the report showed that options for equity financing have expanded recently, with firms using banks, internal financing, outside investors, and more. Among firms that offer equity to employees, most often employees finance the equity purchases.

The study showed that on average, firms had $672 million in assets under management, as part of a 7.5 per cent compound annual growth rate (CAGR) since 2014; for revenues, it is $4.193 million, with a CAGR of 9.4 per cent. As far as clients are concerned, RIAs have an average today of 380 clients, on the back of a growth rate of 5.4 per cent.

With stories abounding about merger and acquisition activity, organic growth remains the main growth source, but acquisitions are significant for a minority. Figures show that over the past four years, 18 per cent bought clients via acquisitions. Related to this, 92 per cent of RIA firms are thinking about internal succession as current owners plan to step down; 62 per cent are primarily led by the founders and 38 per cent of them have a documented path to partnership.

Services
Some 79 per cent of firms offer philanthropic advice as part of their value offerings and this area in 2018 was the highest of any category, with tax planning coming second, at 74 per cent, followed by family education, at 72 per cent. The lowest percentage was for life insurance planning (28 per cent).

Productivity is increasing. In 2018, professionals working in these firms managed an average of $97 million each in AuM, up from $88 million in 2014. As for number of clients, the figure rose to 52 from 46, the report said.

(This publication will draw out more insights from the report next week.)