Three quarters of RIAs find that growth makes their operations more complex, and 52% said it becomes harder to maintain momentum as they grow, according to a new survey of independent advisors who custody assets with Schwab Advisor Services.

Conducted during the first two weeks of December 2022, Schwab’s 16th annual Independent Advisor Outlook Study polled 862 RIAs with an average age of 52 years and total AUM of $359 billion across the entire group.

The No. 1 measure of growth for RIAs is AUM, but 64% of the advisors surveyed cited “number of clients served” as the second most important sign of growth. As firms grow, 95% of respondents said, it becomes easier to invest in the long-term instead of focusing on short-term goals. Fully 82% said that, with growth, it gets easier to attract talent, 80% found it easier to weather market downturns, and 67% said growth enables them to take more risks.

As for how they differentiate themselves, 87% of respondents said it has to do with offering personalized portfolios. For further differentiation, 44% said they offer alternative investments and 33% said they offer ESG investing. Another 16% reported planning to offer alternative and ESG investing in the next three years.

When asked about the use of increasingly sophisticated data aggregation and analytics tools, the advisors’ answers became more complex. Some 80% said they already use data analytics to improve portfolio decisions, and 76% said they see the opportunity for data technology to enable better client service. In fact, 71% of respondents acknowledged using technology for client communications, 69% said they also use it to improve operational efficiencies, and 56% said it can help them streamline operations.

But only 47% of advisors surveyed use data tools to identify unmet client needs, and another 39% said they plan to do so in next three years. At present, just 35% of RIAs reported that technology contributes to personalized client relationships, and a mere 34% felt it helps with managing resources more efficiently or with driving lead generation.

From this seemingly contradictory data, the report concluded that "RIAs are struggling to find the expertise to build the capabilities necessary to aggregate, analyze, and operationalize the vast quantities of data available to them.”

The desire to better use technology, however, seems evident. Fully 79% of advisors said automation saves time, 70% said it allows you to focus on higher value tasks, and 67% said it allows you to spend more time servicing clients.

Nevertheless, though 55% of respondents reported having great data tools available, 48% acknowledged having a problem finding the right skills among staff to utilize those tools.

Asked to zero in on their biggest challenges with using data, 76% of advisors cited concerns about maintaining client security and privacy.

Still, 58% of respondents said they want to use data to better serve clients but don't know how to, or don't have the resources and expertise to generate useful insights from the data they do have.

They also said they know clients expect convenience, personalized advice, and a one-stop shop for managing their financial lives. Nearly 70% of those surveyed said that if they could automate more tasks, they would actually spend more time with clients; 62% said they would target more clients or more opportunities.

RIAs have made some headway in automating the more onerous aspects of their day-to-day work, the survey found. When asked about their progress toward automation, respondents gave themselves a middling grade. On a scale of 1 to 10, where “1” is “totally manual” and “10” is “totally automated,” the median answer was 6.

"It is imperative, then, for RIAs to find a way to blend the efficiencies of automation with the white-glove service that ensures their clients' proliferating needs are being met,” said the report. "The most successful firms will be the ones that use automation, digitization, and … data insights to create more informed and engaging client interaction, both in-person and online."