Independent registered investment advisors (RIAs) realized record growth in revenues and assets under management in 2011, and a majority still has set additional growth as their goal for this year, according to a survey by Charles Schwab.

Despite the year's flat market performance, the median RIA firm increased revenues by 12% and AUM by 3.8%, marking a second consecutive year of record highs for the industry, according to the Charles Schwab 2012 RIA Benchmarking Study.

The median new client growth, minus those who left, was 4.7%, the same as the previous year but up from the 3.5% recorded in 2009. Looking solely at new client growth and not counting those who left, the median new client growth for firms was 8.2%, and the top growing 20% grew by 14.7%, Schwab said. The survey included responses from 1,000 firms with $425 billion in combined assets under management.

Profits also grew for firms in 2011, with the median profit being 14%, mostly driven by revenue growth. Another measure of growth, income for principals, reached a median level of $341,000, up 5% from the previous year and 26% from 2009, the survey revealed.

Revenue growth also increased at the surveyed firms, with revenue per professional growing to a median of $374,000, up 6% from the previous year, and revenue per total staff was up to $229,000 from $210,000 the previous year. Revenue per client was up 9% to $8,000.

Although closing new client business is a top creator of growth according to 74% of the firms, the cost of bringing in new clients has increased by 20% last year, the survey showed.

"RIAs successfully grew their businesses to record levels in 2011 despite strong economic headwinds that the industry continues to face," said Jon Beatty, senior vice president of sales and relationship management at Schwab Advisor Services.

RIAs also marked a second year of rising client retention rates with 97% of existing clients remaining with their firms.

Despite the growth levels, RIA satisfaction with their growth over the last three years was down to 67% from 69% in 2010.The decrease may be attributable to longer sales cycles by RIAs, the study said.
Further growth is the number one priority for 55% of those surveyed and 84% have growth-related initiatives among their top three priorities.

RIAs said the important growth factors are maintaining the quality of client services (81%), closing new client business (74%), implementing new technologies (63%), and maintaining efficient operations (61%). A growing number of firms are citing a lack of strategic planning and execution as a barrier to growth (28% in 2011 versus 19% in 2007).

One in seven firms have cited strategic planning or succession planning as their top special initiative in 2011, up from 10% the previous year, suggesting a shift to strategic planning and away from marketing and business development, the study said. Only 42% of those surveyed have a written strategic plan.

"To take advantage of long-term business opportunities and overcome hurdles to growth, advisors can develop a strategic plan that allows them to maximize their resources by prioritizing efforts across client service, operations and business development," said Beatty. "A written strategic plan acts as a roadmap that helps advisors stay on track, make critical business decisions and build long-term value for their firms."

-Karen DeMasters