If you ask five registered investment advisor firms what’s the secret to their success, you might get five—or six, seven or maybe more—different answers. That’s because the possible paths to success in the RIA space are varied, and success seemingly has been the order of the day according to Financial Advisor’s 2015 RIA survey.

As has been the case in recent years as the markets have risen from the ashes of the Great Recession, assets under management were on an upward trajectory for most of the 562 advisor firms that participated in our latest annual survey. Indeed, not all RIAs experienced asset growth in the most recent reporting period—more than 40 firms said their AUM declined, or nearly 7.5% of the total firms that reported.

To view FA's 2015 RIA ranking and the 50 fastest growing firms, click here.

But overall assets among survey respondents jumped 13% over the prior year, to an aggregate AUM of nearly $875 billion. That’s down from the 20% growth rate measured in our previous RIA survey; then again, U.S. equities as measured by the benchmark S&P 500 index gained “only” 13.46% last year versus the 32.31% jump during the previous year.

Rising markets lift all tides, as they say, and many RIAs acknowledge the obvious link between their growing asset base and the health of the financial markets. But that’s not the whole story, of course. Some advisors say their business actually does better when markets are skittish or when they head south, as investors get scared and want somebody to hold their hand and provide guidance.

With the markets still north of the Mason-Dixon line but hovering around in flatlining mode, there don’t seem to be many market catalysts one way or the other. So in our most recent RIA survey, it appears the most prevalent growth catalyst cited by RIAs was referrals. That includes referrals from both clients and centers of influence, but mainly from the former.

“Client referrals have accounted for the majority of our AUM growth,” said Athena Capital Advisors LLC in Lincoln, Mass., which saw assets grow 16.66%, to more than $5.9 billion. They weren’t alone in making such a proclamation.

Some RIAs have grown their practices through strategic partnerships with other professionals. “We partner with CPAs to provide wealth management integrated with tax and related planning,” said Honkamp Krueger Financial Services Inc. in Dubuque, Iowa, which grew its asset base more than 21% to $2.1 billion. “We continually refine methods to help CPAs identify needs for services within their existing base of tax and consulting clients.”


Other firms, such as serial acquirer United Capital Financial Advisers LLC, rely on acquisitions of sizable firms and tuck-ins of smaller outfits to grow their operations. In United Capital’s case, the name of the game isn’t just growth for growth’s sake. “For us, cultural fit is paramount,” said the Newport Beach, Calif.-based company, which saw its AUM rise 16.60% to $11.1 billion. “We are extremely selective on acquisitions.”

Some RIAs credit their growth to their ability to hire—and keep—top-notch employees. Ferguson Wellman Capital Management in Portland, Ore., a $4.2 billion firm that grew its assets more than 95%, cited its ability to attract, reward and retain top investment professionals as a key growth driver.

Human Capital
In some ways, the RIA profession faces a good, or at least an interesting, problem. “The issue isn’t one of growth; it’s one of capacity,” says Mark Tibergien, CEO at advisor custodian Pershing Advisor Solutions LLC. In other words, there are more people looking for advice than there are advisors.

Tibergien says there are two ways to solve the capacity issue: new people and technology. Size becomes a problem when there is no formal staff development, he notes, and firms that fail to address staff development are candidates for takeover.

Tom Connelly, president and chief investment officer of Versant Capital Management in Phoenix, says it’s hard to find new employees in his market, particularly for the type of people his firm wants. “The established talent is mostly male, and there aren’t a lot of RIAs here, so established talent is hard to come by,” he explains. “And I’m not in the habit of trying to poach my colleagues’ employees.”

To attract young people, Versant created an intern program at Arizona State University that’s now in its third year. “We’ve got some good people from that, but it’s been really hard to attract qualified women because they’re in such demand in our local marketplace. We’re trying to build a female-centric firm, so we’re going to expand our internship program to Grand Canyon University.”

Versant, which reported AUM of $621 million, grew at a subdued rate of a little more than 2% as it retooled operations by adding new technology platforms and upgrading existing back-office capabilities to better manage its current size and to position itself for growth. The pause in last year’s growth rate came after several years of explosive growth for Versant. The firm had $191 million in assets in 2008 and $316 million at the start of 2011.

“We have a lot of marketing opportunities in the Phoenix area, and there’s not as much competition as in New York, Denver or the Bay Area,” Connelly says. “We don’t talk much about making acquisitions because we feel organic growth should be pretty good for us in that marketplace.”

Capacity issues are a concern at Capital Wealth Advisors, the fastest-growing firm in our annual RIA survey with an AUM growth rate of more than 7,300%, to $249 million in assets. Based in Naples, Fla., and with offices in Charlotte, N.C., and Omaha, Neb., the company started in 2004 as an insurance and estate planning shop and later added an investment advisory practice and an institutional investment management team. “We don’t advertise; we do everything by referrals,” says company president and CEO William Beynon , who notes the wealth advisory business has been the firm’s fastest growing in terms of new client activity. The company’s different units “all feed and help each other,” he adds.


Beynon expects significant growth at his company for the foreseeable future, but not at the rate of the past year. “Obviously, that will have to flatten unless we dramatically raise our client minimum, which we don’t want to do at this stage,” he says.

And he doesn’t want to grow to the point where the firm’s high-touch client service suffers. So the firm has been hiring new staff, including investment management analysts and client-facing advisors with an existing book of business.

“We want to find like-minded seasoned advisors who want to make a shift from a wirehouse, private bank or another RIA and join a growing firm such as ours and who feel we can add value to them and [help] them grow their practice,” Beynon says.

The Economy Matters (Mostly)
Based on anecdotal responses in the Financial Advisor Survey, one recurrent theme was that it’s a great time to be an RIA in the San Francisco Bay Area. Numerous firms in that neck of the woods cited boom times in Silicon Valley as a rich source of client activity.

Likewise, RIAs in New York City, Texas, South Florida and other locales cited strong local economic growth as drivers. Other advisor firms said slow regional economic growth was a headwind to growth, while still other firms said the state of the local or national economy was a neutral factor in their business.

But it appears no region is benefiting more from its local economy than the San Francisco-San Jose metro area. Survey respondents of all asset sizes said they consider themselves beneficiaries of the tech boom along the Bay Area corridor. One such firm is Mission Creek Capital Partners Inc., located in San Francisco’s financial district.

“We don’t try to be all things to all people—we’re actually a specialized advisor,” says Henri Moudi, managing director at Mission Creek. “Our focus is working with entrepreneurs, executives and employees mainly at venture-backed growth companies. The Bay Area has an incredible concentration of venture and private equity-backed companies. I think the most recent statistic is the Bay Area has more than 25 private companies which have market caps greater than $1 billion.”

Mission Creek has expanded rapidly during its three years in business and last year reported assets of $82 million on a growth rate of 49%. Twitter and other young Turk tech companies are located in Mission Creek’s neighborhood, providing a ready market for the company’s services.


“We offer sophisticated evaluations and analysis for our clients, who often have significant employer-based concentrated stock holdings and incentive- and nonqualified-stock options that comprise a considerable portion of their net worth,” Moudi says. “Given the amount of customization required, this is an area that the large bulge-bracket firms and traditional RIAs don’t have the interest or expertise to provide appropriate solutions, so we’re finding a tremendous unmet need.”

As a result, Moudi says, that has created an outsourcing opportunity for his firm. “Other RIAs and advisors have reached out to us for our specialized expertise to best service their clients that may have similar exposures.”

According to Eliza De Pardo, principal and director of consulting at FA Insight, many top-tier advisor firms achieve superior growth by focusing heavily on defining a growth strategy and having the discipline to carry out their strategic plans.

She could’ve been talking about Conrad Siegel Investment Advisors Inc. in Harrisburg, Pa. The company is a wholly owned subsidiary of Conrad Siegel Actuaries, which began life more than 50 years ago by providing independent consulting services for retirement plans. When people in the plans asked for help with their investments, the company started an investment subsidiary firm in 2002.

Conrad Siegel Investment Advisors’ repertoire has expanded from its initial focus on retirement plans to one serving high-net-worth individuals who want guidance after they retire. The firm also handles retirement plans for both colleges and municipalities in Pennsylvania.

About 90% of Conrad Siegel’s $2.8 billion in assets are linked to retirement plans, and the rest to high-net-worth individuals, says Tara Mashack-Behney, partner and president at the firm. The company’s asset base grew nearly 246% in its last reporting period.

“Colleges and universities have been the prime growth driver during the past year,” Mashack-Behney says. “We started our first college client in 2013, but the growth really occurred in 2014.”

Most of Conrad Siegel’s business is in central Pennsylvania, though it does have clients in California, Texas and New York. “Thanks to the Internet, e-mail, podcasts and webcasts, it’s easier to expand geographically nowadays,” Mashack-Behney says.

Throughout much of its existence, she says, the company basically let business come to it rather than overtly seeking new opportunities. But that’s changing.

“We’ve been getting a little more aggressive lately,” she says, “and realized, ‘Wow, look at how much we’ve grown with business coming to us. Imagine how much more quickly we could grow if we were more aggressive.’

“Over the past two years, we’ve initiated a pretty aggressive marketing plan including more networking with referral sources such as accountants and attorneys who are gatekeepers and trusted advisors of retirement plans,” she adds. “And we’ve been proactive in identifying the companies we want to work with—you can find a lot of information on BrightScope or on company lists that appear in different publications. We’re doing research on those companies and trying to get our foot in the doors through referrals of key individuals in that company.”

She believes Conrad Siegel has the infrastructure in place to support its growth plans. “One of the challenges in growing is making sure you have the infrastructure, because you don’t want to be overstaffed yet you can’t grow too slow internally because you can’t service the client needs.”


Don’t Be A Commodity
The RIA space seems to be in a good place within the overall advisory industry, but it’s probably safe to say most advisors realize they can’t run their business on cruise control. Thomas Scalici, CEO of Cornerstone Advisors Asset Management in Bethlehem, Pa., believes one of the challenges facing RIAs is the threat of being commoditized in an increasingly fee-conscious world.

“We’re seeing that now with fee disclosures in the 401(k) world where everyone is so focused on reducing fees that there’s a tendency to spreadsheet everyone one to the point you lose the essence of the firm and the differentiation in their service model,” says Scalici, whose $4.5 billion firm grew its assets more than 14%.

One of the company’s big growth drivers has come from the 403(b) retirement plan marketplace, where it’s been a player since the early 2000s. “That accelerated when the 403(b) rule changed in 2009,” Scalici says. “We’ve gone from a relatively small presence to having more than $1.2 billion in assets in that market, primarily by helping these institutions manage the fiduciary process.”

Having a bankable niche and knowing how to capitalize on it has made Cornerstone one of the biggest RIAs in the country. “I think the firms that will be the most successful are the ones who can best articulate their business model and their value-add,” Scalici says. “If they can’t do that, I think there will be continued consolidation.”

Perhaps the consolidation trend, or maybe something else that’s not even on the radar right now, will be a defining theme in next year’s RIA survey.