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April 01, 2022
Emerging RIAs face a tough competitive landscape. While the RIA industry’s total AUM grew by 13.2% in 2020, growth was concentrated at large firms. Boutique firms broadly saw assets decline.1 However, thriving RIAs are leveraging a secret sauce to grow their books and delight their clients.
The Growth Puzzle
For emerging RIAs, finding the right growth strategy can be difficult. Large RIAs tend to capture the lion’s share of market growth, and plotting a path to success can be hard for smaller firms.
One proven answer to the growth puzzle is specialization (see Figure 1).
Charles Schwab. 2021 RIA Benchmarking Study. 2022.
8 Benefits of Specialization
By focusing on specific areas of expertise, RIAs can set themselves apart from their competition, enhance their service offerings, build a strong reputation, and establish long-term relationships with clients.
Specialization—and particularly building a team offering a range of specialized services—offers many benefits, including:
- Faster Growth: By targeting specific fast-growing niches such as pre-retirement Baby Boomers or retirement income planning services, RIAs can boost their growth.
- Greater Sustainability: Diversifying across different client demographics helps RIAs build a more sustainable and resilient business.
- Better Client Service: By specializing, RIAs can develop a comprehensive suite of tailored services, which can help them meet the diverse needs of their clients (see Figure 2).
- More Lucrative Clients: High-net-worth clients demand an array of specialized financial planning services, and RIAs that do not offer them will not attract these highly desirable clients.
- Diverse fee structure options: Offering a range of specialized services enables RIAs to diversify their fee structures – they can potentially capture both fees-for-service and AUM fees, or even introduce tiered subscription models.
- Greater Client Retention and Referrals: Specialized services help RIAs deliver better results for clients, and this can lead to increased “stickiness” – it enhances the probability that clients will look to you first when requiring (or recommending) specialized advice.
- Easier Recruiting, Better Retention: Experienced advisors with specialized knowledge may view specialized RIAs as an opportunity for partnership, while promising young advisors may look at your firm as an ideal place to gain experience, develop a specialization, and stay for years.
- Better Ability to Differentiate: In a crowded marketplace, specializing allows RIAs to stand out from the competition.
Spectrem Group. Wealthy Investor Series: Wealth Management Redefined. 7/2021
Perhaps even more importantly, specialization can help RIAs meet client expectations for excellence, deep knowledge, and detailed, actionable strategic insights.
To learn more about how specialization can boost RIA profitability and growth, visit our RIA Resource Center now.
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1 Investment Adviser Association and National Regulatory Services - Investment Advisory Industry Snapshot. July 2021. Large firms defined as more than $5B in reported assets under management; boutique firms defined as less than $100M in reported assets under management.