Independent registered investment advisor (RIA) firms' assets under management grew a median of 20 percent in 2006 and revenues increased at a median rate of 16 percent during the same period, according to a recent study by Schwab Institutional.

   In addition, the study found that participating firms grew their client base by eight percent annually from 2003 to 2006, with the average client size increasing 42 percent to $1.04 million.

   According to the study, the largest source of asset growth is new clients. More than 50 percent of participating firms' asset growth came from new clients, and 88 percent of those new clients were generated from either existing client (59%) or professional (29%) referrals. More than 80 percent of firms reported having at least one professional referral relationship, with CPA firms (72%) and law firms (64%) being the most common. But while almost every firm generates new business from referral sources, some firms are significantly more successful. It was revealed that the top 20 percent fastest growing firms, excluding investment performance, generate two to three times the referrals as the typical firm.

   "Referrals are the cornerstone to any effective growth strategy, and the fastest growing firms in our study prove that there is still tremendous upside for most advisors," said David Welling, Schwab Institutional vice president of marketing and advisor business management. "But with growth comes challenges, including the continuous search for new employees and the need to find more organizational scalability. Our research clearly indicates that the more successful firms maintain a disciplined approach to growth and plan ahead."

   Seventy-six percent of advisors are satisfied with the growth they've experienced, and 82% plan to grow in the future. But advisors are well aware of impediments to growth or areas that need improvement: 32% of advisors said they have at least one major barrier to growth and more than 75% reported that they have at least one major or minor roadblock to growing. The number one barrier to growth according to the study is finding adequate time to dedicate to business development, an issue with 45% of participating firms.

   Thirty-five percent of firms participating in the study reported that hiring talent was a key challenge, ranking it the second biggest barrier to growth and firm productivity. According to the study, advisors indicated that managing the growth and maintaining service levels to existing clients often did not leave enough time to focus on staff or plan for future growth.