RIA Compliance and Practice Management Blog

RIA Firms that Offer Financial Planning are Surviving and Thriving

Posted by RIA in a Box

Sep 1, 2015 10:30:00 AM

Earlier this year, we surveyed over 1,000 registered investment adviser (RIA) firms about their operations, technology, and advisory fees charged, and then paired it with several different firm performance metrics. Previously we discussed how our survey revealed that RIA firms that aggressively adopt technology are growing assets under management (AUM) faster relative to their peers In this next post takes a look at the data to answer the question: Do RIA firms that offer financial planning services perform better relative to firms that do not offer such services?

About 60% of the 1,023 RIA firms that participated in our recent survey disclose on their Form ADV Part 1 that the firm offers financial planning services. The chart below shows what percentage of the advisory firms that participated in the survey that were initially registered in a given year currently offer financial planning services:

Percentage of RIA firms offering financial planning based on what year established

The above chart indicates that a lower percentage of firms that were recently started are currently offering financial planning services compared to RIA firms started in past years. At first glance, this may seem to indicate that the offering of financial planning services is becoming less popular over time. However, the above chart is instead likely an example of survivorship bias which in this instance is the logical error of focusing on investment advisory firms that have “survived” and are still in business while overlooking firms that have gone out of business.

The Ten Critical Features of an RIA Technology System

In our observations, RIA firms that offering financial planning tend to have a higher likelihood of success compared to those that do not. This is not to say that firms that offering financial planning services are guaranteed to succeed, however offering such services often indicates that a firm is focused on providing a more holistic service offering to clients.

According to our survey, 72% of RIA firms founded in 2008 presently offer financial planning services. Looking back though, it’s more likely that back in 2008 at the time of the firms’ initial registrations, the number of total firms started in 2008 offering financial planning services was closer to the 56% figure observed for firms founded in 2014. In the six years between 2008 and 2014, a few events likely occurred:

  1. Firms that did not initially offer financial planning services evolved to offer a more holistic service offering which today includes financial planning; and
  2. A higher percentage of firms that did not offer financial planning went out of business compared to firms that did offer such a service.

We plan to further test these assumptions in future studies. However, this study did reveal that firms that offer financial planning are more likely to experience exceptional growth compared to firms that do not as shown in the table below:

AUM growth rates of RIA firms providing financial planning services

As shown above, nearly 50% of advisory firms that offer financial planning grew AUM at a rate of more than 30% during 2014. Similarly, firms that offer financial planning were less likely to have negative AUM growth in 2014.

Check back in the coming weeks as we continue to release more sneak previews from our upcoming investment adviser industry report on growth, technology, investment styles, and advisory fees. In addition, be sure to review our guide to financial planning software for RIA firms.

Download Our Free RIA Cybersecurity Compliance Checklist

Topics: RIA Operations, RIA Technology

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

RIA Compliance & Practice Management

Stay up to date on the latest RIA compliance, operations, and technology topics.

Hear from industry experts as they keep you up to date on the latest regulatory developments and practice management topics.

Subscribe to Email Updates

Recent Posts