While many financial advisory firms are leveraging technology to create enough scale to serve down-market investors with lower net worth, that trend has not yet translated into lower per-client AUMs for independent firms, says Beatty.
Larger firms generally work with larger clients, according to Schwab. Firms with more than $2.5 billion AUM reported an average client size of more than $3 million, while firms with $100 million to $250 million reported an average relationship size of $1 million.
The fastest-growing firms in Schwab’s analysis were able to generate an additional 3.6 percent of new asset growth in 2016. These firms onboarded a median of 31 new clients in 2016, more than 1.5 times as many as other firms. The fastest-growing firms also added a median of $45 million in AUM from new clients in 2016, compared to a median of $23 million for all other firms.
Firms are relying on referrals as their primary client acquisition strategy, according to Schwab. Moving forward, 42 percent of the firms researched will acquire new business via client referrals, and 30 percent will acquire clients through business referrals, making referrals the most commonly named growth and planning initiatives among firms on Schwab’s platform.
At the fastest-growing firms, referrals from clients and centers of influence accounted for 5.8 percent of new asset growth, compared to 2.7 percent at all other firms.
While referrals remain the dominant form of prospecting and asset gathering, firms that combine referrals with a marketing strategy attract assets 2.4 times faster than their peers.
“It’s a mix of reputational marketing, behavioral efforts around client referrals and cultivating centers of influence within the community that create the best opportunities to talk to prospective cleints,” says Beatty.
Schwab analyzed self-reported data from 1,321 firms that custody assets with Schwab Advisor Services.