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$1B RIAs Lean Most on Referrals to Build Business: Schwab

By Alex Padalka October 16, 2020

RIAs overseeing more than $1 billion in assets are more focused on client referrals, leveraging technology and having written strategic and succession plans in place than their smaller counterparts, according to a recent survey.

RIAs of that size reported 9.2% five-year compound annual growth rates, as well as 7.4% growth in revenue and 4.4% growth in the number of clients, according to Schwab’s analysis of RIAs with $1 billion or more. Between January and April, Schwab surveyed 1,010 advisory firms of all sizes, representing $1.1 trillion in assets under management. Schwab didn’t disclose how many of the firms surveyed had $1 billion or more in client assets.

RIAs with $1 billion or more are focused on expanding their client base through their contacts: 41% of such firms acquire new clients through client referrals, while 24% say they acquire new clients through business referrals, Schwab says. The frim's 2019 RIA survey found that $1 billion RIAs had 4.1 times more new-to-firm client assets compared to new assets from existing clients.

In addition, 22% of large RIAs in the 2020 study say they’re focused on improving productivity through the use of new technology, which is higher than their peers, according to the survey. Moreover, large RIAs are taking a proactive approach to cybersecurity, with 48% implementing client education, 71% resorting to consulting, 79% taking out cybersecurity insurance and 98% offering employee training, Schwab says. 

Furthermore, 21% of large RIAs say they’re improving strategic planning and execution, 19% report hiring staff in a bid to improve their company’s skill set and 17% say they are improving productivity through process changes, according to the survey.   

In addition, RIAs with $1 billion or more say that marketing and growth strategies are the areas they could benefit the most from third-party firms, Schwab says. They’re also interested in outside help for staff training in sales and business development, technology strategy, staff development, back-office process improvements, creating a digital marketing strategy and cybersecurity, according to the survey.

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Tags:  Finding and winning new clients , Client retention , Technology , Succession planning , Schwab

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