FA ’ S 2024 RIA SURVEY & RANKING clients grew over time , so they started raising their minimums . Now they are hiring younger advisors and saying , ‘ Go find new clients with $ 1 million or more .’ And that ’ s just not a reasonable ask . If someone has that kind of pipeline , they will just start their own firm .”
He adds it ’ s for that reason younger firms have bigger growth rates . He claims the organic growth rate of XYPN firms , many of which have lower or no minimums and target the emerging affluent , is much larger than the industry average . Recent research from Ensemble Group confirms that RIAs with younger partners sport higher growth rates . ( See story on page 16 .)
Those firms that can grow organically are likely to see more buyer interest , but even here , as valuations stay lofty , buyers are going to look under the hood . For example , if your main referral sources are custodians , some advisors might view the fee-sharing arrangement as a marketing expense . An acquirer might not .
“ Not all organic growth is created equally ,” says Larry Miles , the CEO at Chicago firm Choreo . “ I ’ ve heard a lot of questions being asked of those firms whose sole or overwhelmingly primary growth channel is a custodial referral program . Because in many respects , you don ’ t really own those clients . You ’ re kind of renting them . And rent is expensive . I think the discerning [ acquirer ] is asking not just what is your organic growth but specifically where is
WHAT MOSTLY ACCOUNTED FOR YOUR ASSET INFLOWS IN 2023 ?
New assets from existing clients 23.13 % Assets from new clients 37.85 % Market performance 33.64 % Assets from mergers or acquisitions 10.28 % it coming from . Is it repeatable ? Is it something you own and control ? And something we can invest in and take you from doing well to really well ?”
Peter Mallouk , the president and CEO at Creative Planning in Overland Park , Kan ., says saturation has had something to do with the lack of organic growth . Whereas it used to be easy in the industry ’ s early evolution to take clients from brokerages and mutual fund companies , now RIAs are increasingly having to take clients from one another .
Will A Talent War Get Legal ?
That ’ s made people wonder whether the war for talent might spill over into more legal proceedings . In the wirehouse world , lawsuits against departing advisors are common ( ask J . P . Morgan ), especially since the breakdown of the famous “ Broker Protocol ,” which has led to a battle royale in federal courts over teams that make off with clients and assets . While that hasn ’ t happened as often in the RIA world , Edelman Financial Engines served a stark reminder that it could when it sued Mariner Wealth in November … accusing the acquirer of poaching 10 advisors and making off with some $ 621 million in Edelman assets . ( Bicknell said he couldn ’ t comment on this directly .)
The desire to hold clients and advisors through legal handcuffs , however , might be ultimately problematic .
WAS YOUR FIRM INVOLVED IN ANY SERIOUS MERGERS OR ACQUISITIONS TALKS WITHIN THE PAST THREE YEARS ?
32.94 %
TOTAL AUM IN 2023 BY SIZE RANGE
SIZE RANGE
NUMBER OF FIRMS
Yes
2023 AUM ( BILLIONS )
67.06 %
No
2022 AUM OF SAME FIRMS
% CHANGE
WHAT MOSTLY ACCOUNTED FOR YOUR ASSET OUTFLOWS IN 2023 ?
Assets withdrawn by retired clients 44.39 % Assets lost by clients who died 12.62 % Assets withdrawn by clients for personal use 27.10 % Assets withdrawn by clients who left the firm 16.12 %
>$ 1billion |
275 |
$ 3,585.37 |
$ 2,939.29 |
21.98 % |
$ 500 million < $ 1 billion |
76 |
$ 54.44 |
$ 47.65 |
14.25 % |
$ 300 million < $ 500 million |
35 |
$ 14.03 |
$ 11.53 |
21.66 % |
$ 100 million < $ 300 million |
31 |
$ 6.44 |
$ 5.55 |
16.12 % |
$ 50 million < $ 100 million |
3 |
$ 0.22 |
$ 0.19 |
16.42 % |
< $ 50 million |
8 |
$ 0.12 |
$ 0.11 |
11.78 % |
TOTAL AUM |
428 |
$ 3,660.62 |
$ 3,004.32 |
21.85 % |
ADVISORY FIRM CHARACTERISTICS
CATEGORY MEAN 2023 MEAN 2022 % CHANGE MEDIAN 2023 MEDIAN 2022
% CHANGE Number of client relationships 5,730.75 5,463.43 4.89 % 675 634.5 6.38 % Firm assets per client * $ 6,274,795.01 $ 5,524,811.23 13.57 % $ 2,048,073.08 $ 1,813,599.89 12.93 % Overall assets per client ** $ 1,492,451.72 $ 1,290,836.28 15.62 % NM NM NM
* A comparison of assets per client at each ranked firm . ** A ratio of total assets to total clients at all ranked firms . NM = not meaningful .
JULY / AUGUST 2024 | FINANCIAL ADVISOR MAGAZINE | 33