Last updated: 09:31 / Tuesday, 9 August 2016
InvestmentNews & BlackRock

One in Four Elite RIAs Are Considering an Acquisition in the Next 12-18 Months

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One in Four Elite RIAs Are Considering an Acquisition in the Next 12-18 Months
  • Industry's largest and most productive RIAs increased their revenues by 23% over the last year, while the typical independent firm's business remained flat
  • Elite RIAs are highly focused on going upstream with their client base, placing a clear emphasis on pursuing ultra-high-net-worth and institutional clients
  • They are also strategically leveraging technology, and employing unique and scalable organizational structures
  • 73% of Elite RIAs build and manage custom investment portfolios for each client

While the majority of advisory firms have seen their revenue levels stall, a group of "Elite" registered investment advisors have experienced significant growth as the result of superior and strategic management, according to the 2016 Elite RIA Study from InvestmentNews Research and BlackRock.

The 2016 study finds that the industry's largest and most productive RIAs increased their revenues by 23% over the last year, while the typical independent firm's business remained flat.

This year's study specifically highlights the primary drivers of this exceptional growth for industry's Elite RIAs, and also looks ahead at strategies that will likely drive future success in the business.

"While the regulatory environment and markets have created headwinds for most firms, the truly Elite RIAs are starting to pull away from the pack," said Mark Bruno, associate publisher of InvestmentNews. "They see an opportunity to differentiate their business right now – whether it's through the services they deliver, or their internal operations – and they are making aggressive moves to increase their market share."

In particular, the study notes that Elite RIAs are highly focused on going upstream with their client base, placing a clear emphasis on pursuing ultra-high-net-worth and institutional clients. At the same time, they are also strategically leveraging technology, and employing unique and scalable organizational structures that allow for superior client service and support – as well as the potential to absorb new advisers and clients through mergers and acquisitions.

Over the last year, the percentage of Elite RIAs that rely on teaming increased from 44% to 56%. Also the study states that Elite RIAs are investing in dedicated operations and compliance specialists: Nearly twice as many Elite RIAs support a dedicated compliance role compared with all other firms (58% vs. 34%). Another key point is that 73% of Elite RIAs build and manage custom investment portfolios for each client, compared with 54% of all other firms – a core part of their value proposition and competitive differentiators. "Effective use of technology" (57% reporting) and "Growth and retention of existing clients" (51%) are the two factors most cited by Elite RIAs as the drivers of future success over the next 12-24 months.

One in four Elite RIAs are considering an acquisition in the next 12-18 months and 48% of advisers view robo technology as an opportunity, up from 39% just a year ago.

"The 2016 data is particularly noteworthy with regard to the deployment of technology and compliance," said Hollie Fagan, head of BlackRock's dedicated Registered Investment Advisor and Retail Investor Platforms. "Elite advisers have paid attention to an important lesson implicit in the continued emergence of robo-advisory: that technology, thoughtfully configured and deployed, can enhance the client experience and provide a critical tool with which to segment and scale a book of business."

"At the same time, Elite RIAs view the renewed focus on compliance resulting from the DOL's fiduciary rule-making as a significant opportunity, understanding that working with greater transparency and alignment is good for both their clients and the growth and vitality of their business," Fagan said.

 

 

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