The findings in this blog post come from our annual survey of over 1,500 registered investment adviser (“RIA”) firms that was conducted in the first quarter of 2018. This proprietary RIA in a Box study is paired with publicly accessible data provided by the Securities and Exchange Commission (“SEC”). The goal of our annual study is to understand different options that comprise each firm characteristic, and to determine whether specific characteristics affect the growth, size, or operational efficiency of an RIA firm. In this blog post, we focus on the frequency and the differences seen by firms that offer financial planning. By offering financial planning services, RIA firms often look to provide more holistic wealth planning services to help clients meet their financial goals. Some advisors choose to include financial planning services as part of the standard investment advisory fee while others may charge separate financial planning fees.
What Percentage of RIA Firms Offering Financial Planning Services?
This year’s study shows that the percentage of RIA firms offering financial planning services has perhaps plateaued at around 66% to 67%. of firms surveyed. Until this year’s study, we had previously seen a steady increase in the percentage of advisory firms offering financial planning services. It will be interesting to observe future studies to see if this year’s results are an anomaly or a true characterization of the future of financial planning service adoption.
RIA Firms that Offer Financial Planning Services are Growing Assets Under Management Faster
Firms that offer financial planning services have consistently had strong relative metrics in regards to asset under management (“AUM”) growth and efficiency. We saw this with our 2015 study and again with this year’s results:
According to our most recent survey results, RIA firms that offer financial planning are:
- More likely to grow AUM and at a higher rate
- More likely to have a higher number of clients.
- More likely to have a smaller average account size.
- More likely to charge a higher advisory and total fee.
In particular, the average annual AUM growth rate is double for firms offering financial planning services (+18%) compared to firms that do not (+9%). Financial planning services adoption aside, on average, RIA firms grew assets under management by approximately 15% in 2017.
RIA Firms Utilizing a Passive Portfolio Management Style are More Likely to Offer Financial Planning Services
In this year’s study, we also analyzed the relationship between firms’ portfolio management style (active, passive, or both) and at what frequency financial planning services are offered:
Be sure to check back next week as we take a closer look at latest portfolio management styles trends and observations and don’t miss our recent post looking at why RIA firms that adopt multiple technology systems are growing faster.