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Infographic: How RIAs Are Building A Foundation For Success (Courtesy Of Schwab Advisor Services)

Stocks in this article: SCHW

According to the results from the 2014 RIA Benchmarking Study by Charles Schwab, independent registered investment advisors (RIAs) have achieved record growth and the highest profitability of any year since the inception of the Study in 2006. While market performance has played an ongoing role in the growth of assets under management (AUM), an increasingly important proportion of RIA firm success is being driven by steady organic growth alongside the application of greater levels of strategic business practices and operational discipline.

RIA firms of all sizes (based on AUM) have seen remarkable growth since the market lows of 2009, according to the Study, with more than one-third (36%) of all firms doubling their AUM and revenues since that time. The median firm realized a 12.8 percent compound annual growth rate (CAGR) 1 in AUM and 13.6 percent in revenues. The median revenue climbed to $3.3 million, and one-third of these firms earned more than $5 million in revenues in 2013.

“Our Benchmarking Study shows that RIA firms are continuing to thrive,” said Jonathan Beatty, senior vice president, sales and relationship management, Schwab Advisor Services. “Organic growth and a more strategic and disciplined approach to managing this growth emerged as notable trends this year. Robust new client acquisition and expanded share of wallet with existing clients were the primary drivers of organic growth and underscores the power of the independent model and the continued demand for unbiased advice among investors.”

Now in its eighth year, Schwab’s RIA Benchmarking Study is the largest of its kind. The 2014 Study reflects input from more than 1,100 firms representing nearly three quarters of a trillion dollars in AUM. While growth among RIAs has been a prevailing theme over the past several years, the latest data revealed a number of shared strategic and operational characteristics among the Best-Managed Firms 2 that are contributing to amplified growth and business performance versus their peers. These firms are also demonstrating a noticeable focus on building enduring businesses. Best-Managed Firms are outperforming their peers by focusing on three important areas:

1. Institutionalizing their business by applying more strategic management practices and establishing greater levels of operational discipline.

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