Despite the aging market cycle and some volatility, it is still a good time to be an RIA, according to Charles Schwab’s 2019 RIA Benchmarking Study.

RIAs of all sizes are growing, mostly by bringing on new clients, the study, released Thursday, said. The data provided by more than 1,300 firms representing a little more than $1 trillion in assets can be used by advisors to compare how they rank against their peers and show them areas where improvement can be made, said Lisa Salvi, vice president of Schwab Advisor Services, during an interview with Financial Advisor magazine.

For all firms, new clients bring in five times as much in assets, compared with assets added by existing clients, which could explain why one of the top priorities for RIAs is acquiring new clients. Other top priorities include leveraging technology to improve productivity and cyber-security and enhancing strategic planning and execution, the study said.

RIAs are not only seeking new clients, they are also looking for new talent, and a lot of that talent is being poached from other firms, the study said. Seventy-one percent hired new staff in 2018 with 42% recruiting from other RIAs. In order to retain the talent, 71% of firms share equity with nonfounders.

The study shows “the independent advisory space as a whole is doing incredibly well,” Salvi said. “The model continues to resonate with high-net-worth investors and serves as a barometer for the health of the financial industry.”

The key to building a successful business is knowing who the ideal client is.

High-touch client experiences are delivered through great relationship management, Schwab said. Firms that are clear on who their ideal client is can use that as a lens to make business decisions, such as whether to offer new services and what those services should be, as well as what the marketing strategy should be. The study, which included approximately one fifth of the RIA industry, revealed 71 percent of firms added staff last year and 76% plan to hire this year. That brings the median number of new hires per firm to three and the median size of firms to 12 advisors.

“I ask advisors what kind of story they are trying to tell through their website and what kind of clients they are trying to attract,” Salvi said. For instance, “one firm I worked with wanted to work with the ‘sandwich’ generation so the firm needed to create content and experiences that appeal to those clients.”

The top 20% of firms measured by growth grew two times faster than the remaining 80%, the study said. Most of that growth comes from adding new clients, rather than adding assets from existing clients because firms already have a large wallet share from existing clients.

Last year 13% of firms acquired clients by bringing on an advisor with an existing book of business and 4% of firms acquired new clients through mergers and acquisitions. Over the last five years, 18 percent of firms were involved in mergers and acquisitions.

“The biggest question firms have is what they should prepare for next,” Salvi said, “and the answer to that depends on where a firm is now.”

Firms have to be fully focused on their ideal client when attracting new business, and “the same is true for acquiring new talent,” she added. “Firms have to be intentional about their talent acquisition strategy.

The number of advisors moving from one firm to another is increasing. Five years ago, 32% of firms were hiring from rivals and now 42% are hiring from each other, with the percentage going up a little each year. To help increase the number of new employees available for hire, Schwab has programs in place that promote the profession to college, and even high school, students.

The study showed that succession planning still is an area of weakness among advisors. Succession planning ranked ninth on the list of RIA priorities.

“I would love to see that number rise higher in the ranking because it is something advisors should think about every year,” Salvi said. “RIAs often wait for succession planning to be event-driven. Instead they should be thinking about where they want to be three years and five years from now. Doing nothing is a strategy but it does not give you as many options. Planning brings a much wider range of options.”

As firms grow larger, decision making is spread out and not confined to the firm founders. Ninety percent of firms with $100 million in AUM are led by the founders, but more than half of firms (52%) with at least $1 billion in AUM said decision making is spread out. The rest of the firms fall along that continuum. The team approach prompts more people to think as leaders and sets up a succession model. Ninety-two percent of firms are considering internal succession, the benchmark study said.

Marketing has been top-of-mind for advisors for several years: Advisors want to market themselves and they want to do it well. Again, the key, according to Salvi, is strictly defining who the ideal client is.

“For instance, advisors ask me if they should be on Twitter. I tell them it depends on whether that is where their ideal client will find them. If not, then it is a waste of resources, she said. In looking for the idea client, “one advisor told me recently the firm turned away a $20 million client because the firm could not provide the experience the client wanted. That takes bravery,” Salvi said.

In line with that thinking, she said advisors should add those services that make their businesses more compelling to their clients, not just add services for the sake of adding them. In each case that the study looked at, more advisors are enhancing their offerings. For instance, five years ago 58% of advisors were providing family education; in 2018 that percentage rose to 72%. Five years ago, 26% of advisors offered lifestyle management; last year 32% offered it.

“Overall, growth in the industry remains strong, revenues continue to climb, and RIAs are hiring more talent,” Salvi said.