Five years ago, some industry observers took a grim view of the future for independent RIA firms. During the difficult operating environment of the post-2008 economy, some believed these advisories would not survive the challenges of the Great Recession. What a difference five years can make. Based on the results from the 2014 RIA Benchmarking Study from Charles Schwab, many firms today have not just survived but thrived and are enjoying their greatest levels of success to date.

More than one-third (36%) of firms participating in the study (which provides information on topics such as asset and revenue growth, sources of new clients, products and pricing, staffing, compensation, marketing, technology and financial performance) have doubled their assets under management and revenues since the lows of 2009. The median firm grew assets by 12.8% annually and grew revenues by 13.6% to $3.3 million during that period. While market performance has contributed to the growth of these firms, the study data paints a more complete picture. In fact, half of the 12.8% asset growth has been organic—coming from new clients and new business with existing clients.

The power of the independent model is evident not just in the increase in organic growth among RIA firms, but also in the continued demand for professional advice among investors. In Schwab’s “Advice and the Affluent Investor Study” from June 2013, one-third of affluent investors reported that their desire for investment advice had increased in the past year. Meanwhile, the 2014 benchmarking study reveals that RIA firms are growing more strategically as the industry evolves—managing their growth in ways that point to the overall maturity of the industry. Firms today are creating enduring enterprises—legacy businesses built to live beyond their founders. It’s interesting to see in the data the ways in which RIAs are succeeding.

Three Success Drivers Of Top RIA Firms
We learned from the study and from interviews with the best-managed firms (the top 20% of qualifying firms in the study, ranked by productivity, profitability, revenue growth and net asset growth) that top performers show remarkable focus and common attributes in three key areas that are helping them outperform firms in the median.

Relentless Focus On Growth
Growth remains a key objective for all firms in the study. In fact, 25% of them want to double their AUM and revenues over the next five years. The best-managed firms are relentlessly focused on generating strong organic growth. According to the study, referrals are crucial to that effort. While a full 80% of all firms cited referrals as a key initiative for achieving growth, the top-performing firms added approximately 30% more new clients through referrals in 2013 than their peers. Acquiring new clients through referrals from existing clients (41%) and through other professional referrals (39%) ranked one and two, respectively, among firms’ top strategic initiatives for this year.