Sometimes looking at statistics is a bit like looking at a Rorschach test-what you see depends a bit on whether you're a glass half empty or glass half full kind of person.

No doubt about it, RIA assets surged last year after the equity markets bounced back from their profound March 2009 nadir. The 456 advisories participating in Financial Advisor magazine's 2010 RIA survey saw their total assets balloon 23.3% in 2009, to $307.3 billion from $249.2 billion the year before, a growth trend that almost mirrored exactly the S&P 500's surge for the year. And 210 of the firms in the survey saw assets grow even more than that: 50 of the firms reported 50% growth or more and 13 firms reported 100% asset growth or more.

Assets per client grew as well. Mean assets per client grew by 11.27% to $2,167,232 from $1,947,743. And 28% of the firms saw their assets per client grow more than the S&P 500's 23.3% rise.

These are welcome reverses from 2008, when the S&P 500 lost 38% and RIA assets declined in kind. Moreover, higher account values have been accompanied by a continuing windfall in new client relationships. The average number of clients among RIA participants in the survey climbed more than 11% to 522 from 470 in 2009; 129 firms logged growth of 10% or more in client relationships, while 70 firms reported growth of 20% or more and 19 firms saw growth of 50% or more.
Yet even though assets perked up, many firms in the RIA universe continued to struggle with revenues-a still-throbbing hangover from 2008 caused by lower asset bases and higher expenditures. Indeed, revenue at the median RIA firm fell by 11% in 2009, according to a Schwab study.

RIAs are still "revenue challenged," says Stephen Onofrio, a managing director at SEI Advisor Network, which does consulting with some 6,000 RIAs. "All of their income was down. 2009 brought some of it back, but they're still down [almost] 30% from November 2007. Expenses didn't decrease, but their revenues decreased significantly so their profit margins were squeezed."

Take Convergent Wealth Advisors in Rockville, Md., a firm that had an inarguably great year, its assets under management rising almost 95% to $10.237 billion from $5.254 billion. The firm not only saw tremendous growth after picking off a Smith Barney advisor team in November of 2008, but later scored another coup, says CEO Steven Lockshin, when the firm's appearance in Barron's top advisor list prompted a cold call from a family with $2 billion in liquid assets that wanted to ditch their Goldman Sachs advisors and haul their largesse to Convergent.

But even with all that great press and new assets, Convergent still had to contend with revenue problems last year, because it does most of its billing in advance and had to start the year running up from the trench.

"It's a combination of two things," Lockshin says, "It's billing in advance, and it's starting from a lower base. You bill for your fourth quarter using the September 30, 2008, numbers." And from there it was all downhill, he says. "If you remember in January-February [of 2009], the S&P was down 20%. It was down 11% through the first quarter. So your actual fiscal numbers for Q1 and Q2 of '09 are going to look pretty poor. And while you're going to see an increase in Q3 and Q4, most advisors were starting from a significantly lower base than they did in the beginning of '08."

And as firms continued to smart from those lower revenues, many continued to lop off staff in 2009. The mean number of employees at firms with $1 billion or more in assets under management fell to 53 from 58 (almost 8%). At those firms with $500 million to $1 billion, staff numbers fell to 22 from 23; at firms with $300 million to $500 million they fell from 15 to 14; and at firms with $100 million to $300 million the mean number fell from 9 to 8.

"Like everybody else I had to look at my expenses and tighten the belt," says Jeff Hamburger, the owner of New Century Financial Group in Princeton, N.J. "I had to let go of one person on a staff of seven"-an administrative person whose chores were handed over to other staff members. But then things perked up, he says, and now she's back.

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