According to Fidelity Investments’ 2023 RIA Benchmarking Survey, organic asset growth slowed considerably for wealth management firms in 2022, sinking below 4% after a high of 8.2% in 2021. This was driven largely by a nearly 40% decline in AUM from both new and existing clients.
As registered investment advisors (RIAs) face multiple headwinds, including higher inflation and market volatility, Fidelity’s research identified three areas where firms can boost overall growth:
1. Staffing and Productivity. Firms doubled down on onboarding new clients last year to try to offset the impact of market headwinds on profitability. However, most acquired smaller clients. New assets from new clients contributed to only about a third of organic growth activityi, which did not necessarily translate to significantly higher AUM. Instead, this increased the number of clients per advisor and put unnecessary strain on advisors with little-to-no impact, setting off a chain of staffing supply and demand implications for a firm.
The takeaway: It’s important for firms to gauge the right level of staffing and support needed for their books of business. To help with this, Fidelity leveraged its proprietary data to create the new Staffing Calculator. This tool is designed to help firm leaders understand capacity levels and optimize overall efficiency for their advisors and support staff. This ultimately helps advisors with deepening client relationships, as well as delivering higher value engagement.
2. Pricing. After a brief decline in 2021, the size and frequency of fee discounting increased in 2022, with 70% of firms with less than $1B and 89% of firms with more than $1B offering discounts. However, fee schedules remained flat which further impacted firm growth and profitability.
The takeaway: Firms may benefit from reviewing their books of business and rethinking offerings and service based on segmentation. Fidelity helps its clients develop a segmentation strategy through its Client Insight Tool, which provides a deep analysis of a firm’s households to better understand what’s driving revenue.
3. Outsourcing. Firms expect to increase outsourcing of investment management and portfolio construction in the coming years, including leveraging more model portfolios and managed accounts. While more than half of firms are using an investment outsourcing product, irrespective of their size, there’s still room for greater adoption that could lead to more time saving for growth-focused priorities. In fact, a recent Fidelity study found that advisors who utilize investment outsourcing save roughly nine hours per weekii, which they reallocated to activities including financial planning, client relationship management, and business development.
The takeaway: Managing money represents just a fraction of the value advisors provide. RIA firm leaders should evaluate offerings across their business to determine areas with the most growth opportunity. Fidelity’s new thought leadership, 5 Steps to Stand Out in Every Environment, shares practical guides to make it easier for leaders to optimize their business models.
“It’s important for firm leaders to continue prioritizing ways to enhance their business model, especially during times of market uncertainty,” said Anand Sekhar, vice president of Practice Management & Consulting at Fidelity Institutional. “Fidelity has the tools and resources to help evaluate the foundational elements of their firm – including analyzing their books of business and staffing models – so they can focus on their growth mindset, deepening client relationships, and standing out amongst their peers.”
For more data and findings from Fidelity’s 2023 RIA Benchmarking survey, please download our fact sheet: https://clearingcustody.fidelity.com/app/literature/item/9910789.html.
Methodology: 2023 RIA Benchmarking survey was conducted via online survey from April 17 through July 4, 2023, and it was administered by an independent third-party research firm not affiliated with Fidelity. Fidelity was identified as the study sponsor. A total of 245 RIA firms participated in the study. The results may not be representative of the experiences of all firms or indicative of future success.
The RIA Staffing Calculator uses data from Fidelity's annual RIA Benchmarking Study to compare average staffing levels based on data you provide. The data used to generate calculator results are intended to provide you with a general idea of what you may expect in each future scenario. The RIA Staffing Calculator is for illustrative purposes only. The projections or any other information generated by our methodology regarding the likelihood of the various outcomes are hypothetical in nature, do not reflect actual results, and are not guarantees of future results. The projections may have certain inherent limitations since they do not reflect the actual impact that material economic and market factors might have on the RIA's business. Numerous factors make the calculations uncertain, such as the use of assumptions about historical revenues and expenses and the data you have provided. Results may vary with each use and over time.
About Fidelity Investments
Fidelity’s mission is to strengthen the financial well-being of our customers and deliver better outcomes for the clients and businesses we serve. With assets under administration of $11.5 trillion, including discretionary assets of $4.4 trillion as of September 30, 2023, we focus on meeting the unique needs of a diverse set of customers. Privately held for 77 years, Fidelity employs more than 73,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit
https://www.fidelity.com/about-fidelity/our-company.
CORPORATE HEADQUARTERS
245 Summer Street, Boston, Massachusetts 02210
Fidelity Brokerage Services LLC, Member NYSE, SIPC 900 Salem Street, Smithfield, RI 02917
Fidelity Distributors Company LLC, 500 Salem Street, Smithfield, RI 02917
National Financial Services LLC, Member NYSE, SIPC, 245 Summer Street, Boston, MA 02110
© 2023 FMR LLC. All rights reserved.
1115500.1.0
[i]Excludes market appreciation and M&A activity.
[ii] Fidelity Financial Advisor Community—Investment Approach & Product Survey (May 2023).