December 11, 2023

According to Charles Schwab’s 2023 RIA Benchmark Study, assets under management (AUM) growth for financial advisory firms will hit a multi-year low in 2022.

Of the 1,300 companies included in the study, the top performers (those in the top 20 percent of the Schwab Corporate Performance Index) saw no growth in assets under management last year, down 28 percentage points from the previous year. Others fared even worse, with AUM growth of negative 9% over the same period.

last year marked Wall Street’s worst year since 2008By the end of the year, the S&P was down nearly 20% and the Nasdaq was down 33%.

2022 is the worst year for the company’s AUM growth since at least 2018 (the earliest year for which data was included in the 2023 study). Lisa Salvi, managing director of Advisory Services at Charles Schwab, said that because the group of companies included in Charles Schwab research changes each year, it is not advisable to compare such metrics across multiple study years.

although overall growth declineSalvi said the top-performing companies had done a “remarkable job” in navigating such an unfavorable economic environment.

Wally Okby, strategic advisor at Datos Insights (formerly Aite-Novarica), said: “The fact that top performing companies have flat year-over-year AUM is a strong testament to their ability to adapt and attract billions in net new fee-based assets; more than offsetting negative market conditions.”

Despite the economic downturn, customer retention The study shows that this rate remains at 97%.

“You might have the same number of clients in the same account, but it usually looks like it’s lower because there aren’t a lot of good places in the market,” Salvi said. “When you think about how many clients these companies serve and how much communication they tend to have during periods of market volatility, you don’t have as much time to spend on prospecting, marketing strategies, workshops, and closing new business. So I think they’ve done a pretty good job of balancing that.”

Finding this balance is a challenge for the bottom 80 percent of companies in the Schwab study. While the net worth (excluding investment performance) of the top-performing firm’s existing clients fell 13% year-over-year, the net worth of other firms with more than $250 million in assets halved.

“RIAs need to double down on spending less time on administrative/non-revenue-generating activities and more time adding value through new customer acquisition and revenue-generating activities,” Oakby said. “Wealth managers at firms that consistently manage and enhance digital engagement, digital communications, client reporting, client relationship management and financial planning platforms, among others, typically outperform their peers.”

Top-performing companies report higher ratios digital integration Studies have shown that they use standardized workflows to reduce the time each customer spends in operations by approximately 20% and increase the time spent in customer service by approximately 10% per year compared to other companies.

and The market has largely recovered from last year’s lossesSome advisers say everything is back to business as usual.

“Priorities haven’t changed, and (asset declines) are no longer a current concern now as prices rebound and new assets continue to grow in 2023,” said Ryan Salah, a financial advisor at Capital Financial Partners in Towson, Maryland.

Still, experts say last year’s fallout could hold some lasting lessons for businesses.

“Companies that invest wisely to build and modernize their front-to-back technology capabilities are clearly improving digital customer engagement,” Okerby said. “These investments will allow them to weather market volatility better than technology laggards.”