Advisory Market Booming, Thanks to High Net-Worth Clients, New Strategies

Cork those funeral dirges and uncork the bubbly - the U.S. investment advisory market is doing much better than pundits, and even some advisors, may think.

That's the outlook from Schwab's 2017 RIA Benchmarking Study, which was released on July 14. In it, the data shows "continued growth" for the market, with an abundance of new clients, and a boost in average client assets size included in the mix.

This from the study:

  • Firms of all sizes experience growth: the industry is seeing 0% five-year compound annual growth rate in assets under management at the median since 2012.
  • Independent advisors are winning high-net-worth investors: average client relationship size reached $1.8 million in 2016, up from $1.6 million in 2015.
  • Fastest-growing firms pair referrals with comprehensive marketing strategies: the best-performing firms are attracting new client assets at 2.4 times the rate of all other firms.
  • The median firm AUM has grown to $593 million in 2016 from $358 million in 2012, a 10.0% five-year compound annual growth rate. In addition, profitability remains strong with standard operating margins of 25% in 2016.

Take HighTower, a registered investment advisory firm based in Chicago. The firm has seen its client assets nearly quadrupled to nearly $50 billion over the last four years. "One of the reasons that HighTower is growing is because investors are demanding that their advisors be fiduciaries, who must put their clients' interests first, not salesmen," says Elliot S. Weissbluth, founder and chief executive officer at the company.

Other financial professionals agree that the DOL ruling has increased firm independence and transparency, and thus client trust, and that's helping advisors grow significantly.

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