Revenue metric dropped starkly for RIAs in ’09

It was another tough year to be a financial adviser — or at least that seems to be one of the conclusions of The Charles Schwab Corp.’s RIA benchmarking study.

In the study, which was released last week, Schwab found that on average, financial advisory firms generated $6,900 per client last year, a sizable drop from the $7,800 per client the firms generated in 2008. What’s more, the median operating income earned by registered investment advisers fell to barely 10% of revenue last year, from 15% in 2008.

Granted, the 870 firms surveyed as part of the study — which manage about $300 billion in combined assets — predicted a 10% bump-up in revenue this year. But that forecast seems a bit Pollyanna-ish, given the latest market gyrations, and a negative public perception about investing and those who offer advice.

Adding clients will continue to be tough coming off last year, when the median RIA firm increased the number of clients by 2.6%, which is about half the increase in 2008.

In fact, just 58% of advisers told Schwab that they are satisfied with their growth over the past three years. In last year’s study, 65% said that they were satisfied with their firm’s growth numbers.

Schwab found that marquee firms continue to outpace rivals in building their operations.

Between 2006 and 2009, the top 20% of firms reported a compounded annual growth rate of 6.1% in assets under management. That compares with 2.4% for all other firms.

Likewise, the top firms reported a 7.3% increase in compounded annual revenue (compared with 0.5% for all other firms). These marquee firms also saw a 5.7% hike in the number of clients, compared with 4% for all other firms.

In addition, the top 20% had 57% higher assets under management per professional last year, 63% higher revenue per professional and 51% more clients per professional.

E-mail Lisa Shidler at [email protected].

Related Topics: Charles Schwab & Co., Charles Schwab Institutional, IN Research