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Great business management starts with great information

Submitted by elizabeth.gaston on February 14, 2019
Key Points

Great business management starts with great information

Jon Beatty, Senior Vice President, Sales and Relationship Management, Schwab Advisor Services

Jon Beatty shares how data and insights from the RIA Benchmarking Study have helped participating advisors make groundbreaking decisions that have propelled them forward in pricing strategies, service offerings, and growth tactics.

Managing an RIA firm requires not only insight and agility but information. In serving their clients well, advisors strive to maintain staffing at the optimal level, market their firms effectively, invest wisely in new technology and equipment, and keep a close eye on the markets—all while minding the bottom line. Is there a management tool that can help you make well-informed decisions while staying focused on your goals?

In listening to advisors talk about what they need to run a successful firm, I've heard over and over again that Schwab's annual RIA Benchmarking Study is one of the most effective management tools they've found. Obtaining the level of business intelligence the study provides could cost thousands of dollars in consultant fees, but it is an exclusive benefit, at no cost, for advisors who custody with Schwab.

The RIA Benchmarking Study is an exclusive benefit for advisors who custody with Schwab.

What advisors are saying

One regular participant told us that the Benchmarking Study helps them make regular updates to their ongoing strategic plan. "It gives us a means by which to check how we're progressing against our peers," the advisor said. "Not only does it add value in the short term, but it also helps us make certain that we're on the right path in terms of our long-term objectives." Here you can see how some advisors have benefited from the study along with some key findings from last year:

Client experience

In 2017, each professional at the median firm managed 50 clients. In evaluating the time advisors spent with clients, one firm realized staff members were overworked, and thus were not giving each client their best. The study also indicated their technology capability was below average compared with their peers. By adjusting staffing levels and upgrading their technology to automate some tasks, they enabled advisors to devote more time to client relationships. Clients responded not only by staying with the firm but by giving positive referrals.

Profitability

The median firm had a standardized operating margin of 27.3% in 2017. One firm, looking at how its pricing structure compared with those of its peers, noticed it was significantly undercharging clients. The firm implemented a new billing system and improved profitability.

Financial management

As a percentage of revenue, total overhead was 35.6% for the median firm, according to the study. Looking at its expenditures and those of its peers, one firm undertook a thorough evaluation of expenses that led to a strategic change in financial management.

Compensation

Forty-one percent of firms had investment/portfolio manager staff, and 24% had financial planning staff in 2017. With more defined positions in its current structure, a firm used the compensation portion of the Benchmarking Study to see where adjusting compensation could help the firm stay competitive.

"We always find answers to the questions that we're looking for in going through the study, and we find questions that we didn't know we were looking for as well." —Independent advisor

A study designed for independent advisors

Customized reporting enables advisors to see how they are performing in the marketplace compared with their closest competitors—other firms of a similar size and business model.

We've designed the study specifically to help independent advisors like you better manage and grow your business. Results, presented in the form of a customized 45-page Peer Report, show you how your firm is performing in the marketplace compared with your closest competitors—other firms of a similar size and business model. Competitive data is available on key business metrics such as financial performance, services and pricing strategies, staffing, technology, and operations. This year, we've also included a category many advisors have asked for—transitioning equity and leadership—information that may be especially important in succession planning, as well as staff development.

Advisors who choose to participate in the compensation portion of the study receive a customized 200-page Compensation Report featuring national and regional salary and incentive information for thousands of employees in 27 key roles, as well as employee benefits and ownership data, along with access to our online Compensation Tool. This information can be essential in recruiting and retaining staff.

"The small investment of time is well worth the rewards we get from going through the process." —Independent advisor

The rewards of investing time in the study

We know from behavioral psychology that decision-making is controlled by two processes—one emotional (intuition or gut instinct) and one rational (data driven). The RIA Benchmarking Study provides data-driven insights that you can then overlay with your understanding of your clients and staff. The two processes work together and strengthen each other. It's a win-win.

If you have already started the study, please remember to submit it by the March 20 deadline (5 p.m. PT, 8 p.m. ET). If you haven't begun, I hope you will start it now.

As one advisor told us, not participating in the study is not an option. "Our industry is way too competitive not to do it, and burying your head in the sand isn’t the solution," the advisor said. "We always find answers to the questions that we're looking for in going through the study, and we find questions that we didn't know we were looking for as well. The small investment of time is well worth the rewards we get from going through the process."

To learn more about the RIA Benchmarking Study, visit our benchmarking resource page, or contact your Schwab Advisor Services representative.

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