the 2021 fidelity ria benchmarking study
TRANSCRIPT
For institutional use. l © 2021 FMR LLC. All rights reserved.
Initial Findings Report
August 2021
The 2021 Fidelity RIA Benchmarking Study
As the importance of scale continues to rise and aspirations for growth abound, firms want to know what lessons they can learn from their largest peers. Interest is especially strong this year, in understanding how big firms have navigated the COVID-19 pandemic and the related challenges that we’ve all faced. With this in mind, we’ve included a new section in this report, focused on understanding how firms with $1billion or more in AUM have handled 2020, and how they’ve fared.
2021 Fidelity RIA Benchmarking Study
2 Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
The 2021 Fidelity RIA Benchmarking Study examined key metrics to help RIAs understand their performance in comparison with their peers, and to help them advance their business. The 2021 study, which includes data through 2020, focused on driving growth through business development activities, as well as other key areas of interest, including:
Financial Data and Client
Information
Strategy and Growth
Client Demographics
Offer and Pricing Technology
The online survey was conducted from March 26 through May 26, 2021, 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 211 RIA firms participated in the study. The results may not be representative of the experiences of all firms or indicative of future success.
We encourage our clients to view their own results against their peer groups on our results site: www.fidelityriabenchmarking.com.
Total AUM # of firms
<$99M
$100–$249M
$250–$499M
$500–$999M
$1B+
19
33
39
78
42Special Addendum on Firms with $1 Billion or More in AUM
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3 Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
2021 Key Findings
Growth • Three-year CAGRs for both AUM and
revenue are strong at 13.1% and 10.3%, respectively.
• Median organic AUM growth remains strong and stable, with new assets evenly split between new and existing clients.
• Top sources of new assets were generally on trend: 55% from client referrals, 20% from third-party referrals, and the final 25% from all other sources (including business development), though AUM from client referrals rose 8 percentage points compared to 2019 levels. Only 5% of clients made a referral.
Business development• Even in a pandemic, business
development programs remained a central focus and top priority for firms.
• The activities that comprised these programs have unsurprisingly shifted significantly toward digital channels. Firms are also reporting improvements in how effective these channels have been.
• As much as firms have stayed focused on it, business development has declined in value relative to client referrals, which account for the majority of new business. This is especially true among smaller firms.
Client focus • Again this year, assets and
professional investment advice remain concentrated with older generations. Seventy-six percent of advisory clients are over the age of 50, and 85% of advised assets are attributable to those clients.
• Advisors should consider ways to engage younger investors earlier in their wealth journey. Data from our 2021 Investor Insights study shows that 8 in 10 Gen YZ investors who have advisors report that they will likely stay with those advisors.
The year 2020 was one of tremendous change; a year of challenges and resiliency. In response to unprecedented disruption, firms shifted their focus and prioritized transformative investments in technology and strategic planning. Business development remained firms’ top priority, and they worked to embrace digital channels. Yet, most new clients and assets were sourced from client referrals. Strong growth trends in AUM and revenue remained intact, as profitability rose and productivity hit new highs. Firms haven’t made significant changes to their fee schedules or pricing models, but they have accelerated their practice of discounting fees, likely as an agile alternative to address fee pressure in the market. We’ve also seen an increase in firms including more services in their overall bps fee. Firms added new technology to enhance their client experience in a remote-first world, and firms that have invested and embraced tech more fully are seeing some benefits. Large firms face many of the same challenges, but they grew faster than their smaller peers, as they deployed bigger business development initiatives. They may also have benefited from a flight to quality and/or scale. There are many open questions about the future of the industry and the changes happening under our feet. What we do know is that the lessons of 2020—around disruption and adaptation, around scale and value—are worth learning. The firms that learn them will have a significant advantage as the next evolution takes shape, and we hope that this report contributes to that effort.
Strategic focus • Multi-year uptrends in prioritization of
business development and succession planning ended, as fewer firms included them in their top five initiatives this year. Even so, business development retained its position as the top initiative for firms.
• Instead, firms increased focus on transformative initiatives such as strategic planning and technology.
• Interest in outsourcing is growing, and there is some indication that firms that outsource are growing faster.
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0.73% 0.68%0.61%
$214
$332
$606
$1.5 $2.0$3.3
2014 2017 2020
4
Financial Data: Overview
Insights
• Established growth trends remained intact, as 3-year CAGRs for both AUM and revenue continued to rise. • Profitability also rose, as all measures of productivity reached new highs. • Overall expenses continued to decline, including a recent drop in indirect expenses that may be influenced by reductions in travel and other impacts of the pandemic.
Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
Strong RIA growth trends continued, despite the pandemic
53% 53% 57%
18% 22% 26%
2014 2017 2020
EBOC Margin (%) Operating Margin (%)
45% 41% 41%
37% 37% 33%
1 2 3
Direct Expenses as % of Revenue Indirect Expenses as % of Revenue
PROFITABILITY (mean) PRODUCTIVITY (median)
ASSETS AND REVENUE (median) EXPENSES (mean)
2014 2017
AUM per client Clients per advisor AUM per advisor Revenue per advisor
$1.1
M
$1.3
M
$1.8
M
2014 2017 2020
67 71
89
2014 2017 2020
$81M $100
M
$184
M
2014 2017 2020
$542
K
$608
K
$951
K
2014 2017 2020
Median AUM ($M) Median Revenue ($M) Median Revenue Yield (%)
2020
10.3%3-year
revenue CAGR
13.1%3-year AUM
CAGR
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6.0% 6.0% 5.7%
Strategy and Growth: Composition of Organic AUM Growth
5
Insights• Median organic AUM growth
remains strong at 5.7%.
• Over time, the composition of organic growth has shifted from a majority of new assets coming from new clients to an even split between new and existing clients. Firms have also benefited from a decrease in withdrawals.
• The top sources of new assets were generally on trend, with 55% from existing client referrals, 20% from third-party referrals, and the remaining 25% from all other sources, including business development and marketing activities. While this is directionally in line with previous years, new AUM attributable to client referrals was up 8 percentage points between 2019 and 2020. Surprisingly, the total set of client referrals were made by just 5% of all clients.
Please note that 2014 composition figures do not sum to 6% due to rounding.Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
CONTRIBUTORS TO ORGANIC AUM GROWTH (Excludes market appreciation and M&A activity)
New Assets from Existing Clients
New Assets from New Clients
Assets Withdrawn by Departing Clients
Assets Withdrawn by Existing Clients
-1.5%
-3.0%
5.3%
4.9%
2020 Composition of Organic Growth
-2.1%
-2.6%
6.5%
4.1%
2014 Composition of Organic Growth
Organic AUM Growth
2014 2017 2020
The composition and sources of organic growth has been stable over time
55%20%
25% Referred by clientsReferred by third partyAll other sources
Sources of New Assets FromNew Clients in 2020
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Improve the firm's marketing and business development efforts
Invest in new or existingtechnology
Improve strategic business planningand execution
Improve clientsatisfaction
Improve investmentperformance
Develop or enhance a succession plan
Strategy and Growth: Top Strategic Initiatives
42%
49% 53%51%
39%44%
71% 69%
56%
28%
35%
27%
39%
32%
37%36%
16%
14%
2014 2015 2016 2017 2018* 2019 2020
TOP FIVE STRATEGIC INITIATIVES FOR 2021
Insights• If nothing else, 2020 was a year of
shifting priorities. Recent multi-year uptrends in the prioritization of business development and succession planning initiatives ended, as fewer firms included them in their top initiatives this year. Yet, business development still retained its position as the top initiative.
• Firms instead increased focus on transformative initiatives such as strategic business planning and investments in technology. They also increased their focus on client satisfaction.
• Prioritization of investment performance continued it’s long decent and hit a new low of just 14% of firms including it in their top 5 priorities.
This chart shows the percentage of respondents selecting each initiative as top five for the year. * Please note that the dotted line represents an implied trend, as we do not have this data for 2018.Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
Firms prioritized transformative initiatives and client satisfaction; business development is still on top
Percentage of firms including in top five initiatives
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Perceived Effectiveness of Those Activities, Among Firms That Use Them
Percentage of firms using activity in 2020 Very Effective
Somewhat Effective
Not Effective
26% 69% 5%19% 68% 13%36% 61% 4%8% 64% 28%
15% 69% 16%33% 56% 11%52% 46% 2%10% 70% 20%11% 53% 36%23% 57% 20%18%* 55%* 27%*12%* 76%* 12%*
NA NA NA6%8%10%
21%23%24%
30%
45%57%59%
64%66%
75%
Purchased lists
Cold calling
Direct mail
PR
Traditional advertising
Online advertising
In-person events
Online events
Other digital marketing (excluding social media)
Social media
Networking
Collateral
Content marketing
Strategy and Growth: Business Development Activities
7
USAGE OF VARIOUS BUSINESS DEVELOPMENT ACTIVITIES
* Please note that effectiveness ratings for these activities reflect a small sample of firms, given the low usage of those activities.Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
Insights• A year of life in a pandemic brought about changes in how firms pursue new clients. Unsurprisingly, usage of activities such as online events and online advertising shot up, while
networking, in-person events, and traditional advertising dropped considerably.• Similarly, more firms now believe that each of these digital channels is at least somewhat effective; though, this experience has also further solidified the importance of traditional channels,
as we saw notable increases in the percentage of firms that believe that networking and in-person events are very effective.
Change Over Past Year
+1%
-7%-17%-1%
-3%+27%-34%+6%-9%-1%
-3%
+1%+1%
Usage of digital channels—as well as firm opinions of them—rose in 2020
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Outsourcing Practices by Business Function Insights• Each function is outsourced
by some firms, but there is a wide disparity in outsourcing practices for different functions. Firms are more likely to outsource in areas outside of their own expertise, such as legal, risk, compliance, and technology.
• However, we’ve also seen strong indications of interest in outsourcing investment management functions that are traditionally considered central to RIA value.
• Conversely, financial planning remains the function least likely to be outsourced.
• In a recent survey of advisors across all firm types (including but not limited to RIAs), we found that advisors who outsource reported higher growth, higher compensation, and fewer clients per advisor.
1%
6%
7%
6%
22%
40%
75%
4%
6%
11%
20%
19%
33%
38%
63%
45%
19%
94%
94%
88%
79%
72%
60%
55%
15%
14%
5%
Outsourced to Third PartyBothHandled InternallyDon't Know
Legal
IT/Tech/ Platform/ Cybersecurity
Compliance
Marketing/ Communications
Accounting & Fee Billing
HR/Training
Investment Mgmt. & Portfolio Construction
Business Strategy
Administrative Duties
Financial Planning
Outsourced NET
94%
86%
85%
45%
40%
25%
21%
12%
6%
5%
Currently using
Plan to decrease
usage
Plan to increase
usage
Managed Accounts 38% 8% 28%
Model Portfolios 26% 4% 50%
Direct Asset Manager Outsourcing 20% 6% 42%
Types of Investment Outsourcing Used
Outsourcing and GrowthDon't
outsource
Outsource 1–5
functions
Outsource 6+
functions
Percent reporting client/ household growth in past year 69% 77% 82%
Percent reporting asset growth in past year 84% 89% 94%
Past year organic AUM growth percentage (Mean) 6% 7% 9%
Past year compensation (Mean) $359K $355K $381K
Past year Individual/ HH Clients per advisor (Median) 160 150 140
Source: The 2021 Fidelity Financial Advisor Community—Outsourcing Survey. Advisor firm types included a mix of banks, IBDs, insurance, RBDs, RIAs, and wirehouse firms.
Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
Outsourcing practices may be on the rise, and outcomes may rise with them Strategy and Growth: Outsourcing to Accelerate
Percentage of firms
Percentage of firmsPercentage of firms
Outsourced to Third Party Both
Handled Internally Don’t Know
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Client Demographics: Generational Wealth
9
PERCENTAGE OF FIRM CLIENTS AND AUM BY CLIENT AGE
% of clients
<30 years of age
30–39 years of age
40–49 years of age
50–59 years of age
60–69 years of age
70+ years of age
2% AUM4% Clients
Share of Wallet 80% 75% 75% 79% 80% 90%
4% AUM7% Clients
10% AUM13% Clients
23% AUM22% Clients
32% AUM28% Clients 30% AUM
25% Clients
● Bubble size reflects percentage of firm AUM by end-client age
Insights• This chart is largely unchanged from
prior years, with assets and professional investment advice still concentrated among older generations. Seventy-six percent of advisory clients are over the age of 50, and 85% of advised assets are attributable to those clients.
• While younger investors will seemingly move through this curve as they age, they may retain their current expectations of advisors. Our 2020 Investor Insights Study found that about 3 in 4 Gen YZ investors expect their advisor to engage next gen family members and provide more comprehensive services. Moreover, about 8 in 10 say they are likely to stay with their advisors and would like to consolidate more assets with them.
• Median share of wallet for all clients is 79%, and the distribution across age ranges falls consistently between 75%–80%, up until age 70, when it jumps up to 90%.
Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
Although assets remain with older investors, engaging the next gen early may offer an advantage
0%
5%
10%
15%
20%
25%
30%
35%
40%
0 1 2 3 4 5 6 7
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Number of Client Segments
Minimums for Assets or Fees
Bundling of Services in Core BPS Fee
Overall Fee (bps)
Offer and Pricing: Pricing Model Changes
10
Changing fees or pricing structure is a top-5 priority
9%Agree/strongly agree firm is receiving increasing pressure from clients to justify fees
2%Agree/strongly agree firm is receiving increasing pressure from prospects to justify fees
4%
CHANGES IN USAGE OF COMMON PRICING MODEL LEVERS
Made Over the Past 5 Years Expected Over the Next 5 Years
Insights• While we’ve seen a slight uptick in
the usage of each of these levers over the past year, our 5-year retrospective and prospective views remain largely unchanged.
• About a third of firms still expect increases in the usage and number of client segments, as well as the usage of asset or fee minimums, in the years to come.
• From 2015–2020, the percentage of firms that use client segments has increased from 31% to 39%, and their average number of segments has increased from 2.9 to 3.7 segments.
• Very few firms indicate increasing pressure to justify fees. Yet, this appears to be a rising concern versus just a year ago. We’ve also seen a fairly dramatic rise in discounting behavior over the last year, with 56% more discounters* and an increase in median discount to ~25 bps.
*Discounters are firms whose actual fee-based revenue is 10+ bps lower than revenue expected, based on their fee schedules. Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
Decreased or Eliminated
Increased or Added
No Change
Decrease or Eliminate
Increase or Add
No Change
2%
4%
1%
14%
75%
73%
86%
72%
23%
23%
13%
14%
1%
2%
3%
10%
63%
62%
83%
82%
36%
36%
14%
8%
5% 3% 6%
2019 2019 20192020 2020 2020
Firms have held off pricing model changes, in favor of ad hoc discounting and higher productivity
Percentage of firms
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2020 vs. 2016
% of firms offering
% of firms offering and including in
overall bps fee
% of end clients at firms offering the service who
receive it
-1% +3% -
+6% +7% +5%
+2% +4% +10%
+10% +9% +5%
+4% +7% -
- - -2%
-2% -1% -3%
+3% - -
+2% +1% -
NA* NA* NA*
- +2% -20%
Offer and Pricing: Service Offering, Bundling, and Usage
11
2020 SNAPSHOT
Insights• More firms are offering financial planning and philanthropic planning services, and more end clients are utilizing these services. • Firms seem to be more likely to bundle services under an overall bps fee, especially services such as financial, philanthropic, and estate planning.
* Please note that 2019 is the first year we asked about life planning/coaching services.Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
18%
18%
25%
27%
55%
58%
66%
69%
75%
96%
99%
40%
15%
10%
10%
10%
30%
50%
20%
70%
75%
100%
7%
14%
15%
16%
38%
36%
54%
59%
64%
78%
90%
Tax Preparation
Life Planning/Coaching Services
Trust Services
Concierge Services
Retirement Plan Servicing
Risk/Insurance Planning
Estate Planning
Philanthropic Planning
Tax Planning and Strategy
Financial Planning
Investment Management
Financial planning is finally table stakes, as firms include more services under their overall bps fee
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Offer and Pricing: Aligning Pricing and Value
12
Insights• The most common stated fee
for a $1M client is 100 bps, regardless of the number of bundled services that they offer for that fee.
• Further, there's no clear relationship between the number of bundled services a firm provides and the fees that they charge.
• The median minimum fee firms charge is $5,000, and 80% of clients pay at least that much.
• While we’ve seen an increase in discounting behavior over the last year, we have not seen a commensurate change in fee schedules.
0
50
100
150
200
250
0
2
4
6
8
10
12
Num
ber o
f Ser
vice
s Bu
ndle
d
Number of Services Bundled
Stated BPS Fee for Bundled Services
STATED BASIS POINT FEE FOR A $1M CLIENT, BY FIRM, BY NUMBER OF BUNDLED SERVICES
Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
Stated BPS Fee for Bundled Services
Each column and marker represent the response of one firm in our study, arranged by number of bundled services.
Despite more discounting and bundled services, firms have left fee schedules unchanged
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Technology: Top Solutions
13
RIA Firm Use Top Three Most Frequently Used Providers In 2020
Technology Solution 2020 YoY Change 1st 2nd 3rd
Portfolio/Performance Reporting 98% -2% Tamarac Black Diamond Orion
Client Relationship Management (CRM) 94% +1% Redtail Salesforce Tamarac
Portfolio Modeling/Rebalancing/Trading 92% -1% Wealthscape Tamarac Orion
Billing 92% 0% Tamarac Orion Black Diamond
Online Client Portal 91% +6% eMoney Tamarac Black Diamond
Financial Planning 88% -1% eMoney Money Guide Pro Advicent/Naviplan/ RightCapital
Aggregation 88% +8% eMoney Black Diamond/ By All Accounts Orion
Compliance/Risk 82% +6% SMARSH Global Relay NRS
Document Management 80% +2% Sharefile Box Laserfiche/ Sharepoint
Workflow System 73% +8% Redtail Salesforce Tamarac
Proposal Generation 55% +13% Morningstar Riskalyze Envestnet
Digital/Robo Advice 16% +5% Schwab Institutional Intelligent Portfolios
Fidelity Automated Managed Platform (AMP)
Betterment/ Proprietary/Built internally
Insights• While the top three providers and their relative rankings do shift a little in some years, the top providers in each category have largely remained intact, year-over-year.• The impact of the pandemic experience can be seen in the rise in overall usage of solutions that enable a better client experience in a digital/remote-first environment, including: online
client portal, aggregation, compliance/risk, workflow, proposal generation, and digital advice solutions.
eMoney Advisor LLC is a Fidelity Investments company and an affiliate of Fidelity Brokerage Services LLC and National Financial Services LLC.Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
An increase in usage of key tech solutions brought little change to the market positions of top providersPercentage of firms
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Technology: Cybersecurity and Risk Management
14
93%Have Written Policies
and Procedures on Cyber Breach
89%Use Outside Compliance Consultants
Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
Type of Insurance Used
97%
77%
62%
55%
E&O
Cyber
Bond
Director and Officers
Median Coverage Amount
$2.0M
$1.0M
$1.0M
$3.0M
Review Frequency of Risk Management Policies and Procedures
9%
19%
10%
45%
1%
16%
Monthly
Quarterly
Semiannually
Yearly
Every Couple of Years
As Needed
Review Frequency of Trading/Money Movement Policies and Procedures
4%
14%
4%
49%
1%
28%
Monthly
Quarterly
Semiannually
Yearly
Every Couple of Years
As Needed
Insights• With renewed focus
on cybersecurity in the remote-first environment, we’ve added new questions to our study, focused on this topic.
• We’ve found that, while most firms cover the basics in terms of maintaining cybersecurity training, written policies and procedures to respond to breaches, and cybersecurity insurance, quite a few firms don’t meet these minimums.
• Interestingly, 9 in 10 firms also hire outside compliance consultants.
With cybersecurity risks on the rise, opportunity remains for some firms to shore up their foundations
78%Have Cybersecurity
Training
Percentage of firms
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Technology: Tech Embracers
15 Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
11.2%13.5%
9.6% 10.7%
2017 2020
3-year AUM CAGR (2017–2020)
9.4% 10.7%6.8%
10.1%
2017 2020
3-year Revenue CAGR (2017–2020)
6.7% 7.2%4.7% 5.2%
2017 2020
3-year Client CAGR (2017–2020)
Tech Embracers
Other Firms
Technology spends as % of revenue 3.1% 2.1%
Technology spends ($) $113K $61K
71% 77%
2017 2020
Insights• Since we introduced
this question in 2017, more firms are self-identifying as Tech Embracers.
• Firms that report embracing technology also spend more on technology. This is true both as a percentage of revenue and in total dollars.
• Tech Embracers are seeing results. These firms have maintained higher growth rates in terms of assets under management, overall revenue, and clients.
Firms That Indicate That They Embrace Technology
Technology Spending for Tech Embracers vs. Others
Growth Rates for Tech Embracers vs Others
More firms are embracing technology; those that do are growing faster
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Special Addendum on Firms with $1B+ in AUM
For institutional use.
0.57% 0.61%0.54%
$1,891$2,105
$2,903
2014 2017 2020
$8.9 $12.0 $13.0
0.76% 0.72% 0.67%
$148$201
$305
$1.2 $1.3$1.9
2014 2017 2020
Insights• Despite a decline in revenue yield, both $1B+ and < $1B firms saw revenue climb, as AUM continued to rise.• < $1B and $1B+ firms have both been able to lower their overall expenses over time.
36% 37% 35%
40% 41% 38%
1 2 3
Direct Expenses as % of Revenue Indirect Expenses as % of Revenue
17
$1B+ Firm Comparison: Assets, Revenue, and ExpensesEXPENSES (mean)ASSETS AND REVENUE (median)
Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
Median AUM ($M) Median Revenue ($M) Median Revenue Yield (%)
2014 2017 2020
Median AUM ($M) Median Revenue ($M) Median Revenue Yield (%)
47% 43% 44%
37% 35% 30%
1 2 3
Direct Expenses as % of Revenue Indirect Expenses as % of Revenue
2014 2017 2020
$1B+
Firm
s<
$1B
Firm
s
$1B+
Firm
s<
$1B
Firm
s
12.7%3-year
revenue CAGR
14.5%3-year AUM
CAGR
9.8%3-year
revenue CAGR
12.3%3-year AUM
CAGR
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54% 55% 60%
17% 22% 26%
2014 2017 2020
EBOC Margin (%) Operating Margin (%)
18
$1B+ Firm Comparison: Profitability and ProductivityPROFITABILITY (mean) PRODUCTIVITY (median)
AUM per client Clients per advisor AUM per advisor Revenue per advisor
$2.8
M
$2.7
M $3.2
M
2014 2017 2020
70 72 74
2014 2017 2020
$201
M
$183
M
$250
M
2014 2017 2020
$1,0
13K
$966
K
$1,2
32K
2014 2017 2020
49% 46%52%
25% 22% 27%
2014 2017 2020
EBOC Margin (%) Operating Margin (%)
Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
AUM per client Clients per advisor AUM per advisor Revenue per advisor
$0.9
M
$1.0
M
$1.5
M
2014 2017 2020
67 71
97
2014 2017 2020
$68M
$71M
$129
M
2014 2017 2020
$474
K
$487
K $756
K
2014 2017 2020
Insights• Thanks to revenue growth and expense reductions, < $1B and $1B+ firms have both seen a rise in profitability.• Productivity has continued to rise for < $1B and $1B+ firms alike, and both groups have seen these metrics spike in recent years.
$1B+
Firm
s<
$1B
Firm
s
$1B+
Firm
s<
$1B
Firm
s
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$1B+ Firm Comparison: Strategic Sentiment and Planning
19
We rely heavily on our founders or principals of the firm to drive growth
We have a clearly defined firm story that explains what differentiates us from other firms
We have a plan in place to establish relationships with the adult children of select clients
We have a clearly defined succession plan at our firm that is ready for implementation
We have next-gen leaders who are well-prepared to take over day-to-day management of the firm
In the next five years, we are likely to participate in M&A activity as a buyer
We are actively targeting younger investors to diversify our client base
Our firm uses metrics and KPIs effectively in managing the business
In the next five years, we are likely to participate in M&A activity as a seller
We are receiving increasing pressure from our prospects to justify our fees
We are receiving increasing pressure from our clients to justify our fees
Strategic Sentiments< $1B Firms
84%
63%
37%
34%
28%
23%
17%
16%
10%
5%
3%
50%
72%
42%
53%
42%
22%
11%
28%
6%
6%
0%
$2.5B+ Firms
Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
44%
81%
40%
55%
50%
62%
19%
45%
12%
12%
5%
Insights• Where most firms with less than
$1B depend heavily on founders or principals to drive growth, $1B+ firms generally rely instead on a clearly defined firm story and differentiated value proposition in a decentralized distribution model. In addition, 2 in 5 $1B+ firms—and 1 in 2 $2.5B+ firms—have a business development officer.
• $1B+ firms are also more likely than their smaller counterparts to use metrics/KPIs to manage the business and to have clear, implementation-ready succession plans.
• Firms of all sizes are relatively unfocused on younger investors and relationships with adult children of select clients.
• $2.5B+ firms are ~3X more likely to be buyers in the M&A market over the next 5 years.
$1B–$2.49B Firms
Distribution models and strategic plans can differ quite a bit between firms of different sizes
(Rated 6/7 on 7-pt agreement scale)
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CHANGE OVER PAST YEAR
-8%
-20%
-2%
-5%
-10%
+45%
-53%
-25%
+6%
0%
+3%
-4%
+7%
CHANGE OVER PAST YEAR
+5%
-3%
-6%
+3%
+14%
+31%
-33%
0%
+14%
-3%
-3%
-8%
0%
86%
71%
95%
71%
69%
81%
38%
17%
36%
45%
12%
5%
19%
86%
78%
86%
75%
67%
56%
31%
39%
33%
25%
11%
3%
6%
CHANGE OVER PAST YEAR
+2%
-21%
-10%
-1%
-7%
+22%
-28%
-7%
+3%
-1%
-4%
+4%
-2%
$1B+ Firm Comparison: Business Development Activities
20
Business Development Activities
Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
Content marketing
Networking
Collateral
Social media
Other digital marketing (excluding social media)
Online events
In-person events
Traditional advertising
Online advertising
PR
Direct mail
Purchased lists
Cold calling
< $1B Firms
68%
58%
51%
51%
50%
32%
28%
20%
17%
13%
10%
7%
5%
$1B–$2.49B Firms $2.5B+ FirmsInsights• Overall, $1B+ firms were
more likely to engage in every business development activity. About 7 in 10 $1B+ firms spent time and resources networking, on social media, conducting other digital marketing, and hosting online events. By contrast, only about half of firms < $1B followed suit. Content marketing and collateral are other areas of advantage for $1B+ firms.
• $1B+ firms also responded better to the pandemic, increasing usage of online events and online advertising. This is especially pronounced for the $2.5B+ firms: 8 in 10 used online events this year. That’s more than double the previous year.
Larger firms have more robust business development programs and were more agile in the pandemic
Percentage of firms
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$1B+ Firm Comparison: Client Acquisition Summary
21
25% 22% 30% 30%
20%16%
23% 32%
55% 61%47% 39%
All other new clients(including business
development, clients gained from hiring advisors, and M&A)
Referred by third-party
Referred by clients
% of New Clients % of New AUM from New Clients
All Firms $1B–$2.49B Firms
(Mean figures)
< $1B Firms
(Median figures) All Firms < $1B Firms $1B-$2.49B Firms $2.5B+ Firms
% of clients who made any referrals 5% 5% 5% 6%
% of COIs who made any referrals 10% 10% 10% 10%
Closing ratio (% of prospects that become clients) 70% 75% 51% 55%
% of new clients closed in two or fewer meetings 75% 90% 50% 50%
Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
Insights• Firms of all sizes were more
dependent on client referrals than in previous years, though $1B+ firms have a healthier mix of sources, with more than half of new clients and assets from third-party referrals, business development work, and other acquisition activities. $2.5B+ firms are approaching an equal distribution across these 3 sources.
• Overall, most new clients and assets were from client referrals, and all referrals originated with just 5% of clients. This demonstrates the importance of client experience and cultivating promoters within your client base.
• Smaller firms close a much higher percentage of prospects than larger firms, and they are far more likely to do so in two or fewer meetings. While this may reflect bigger business development programs and more overall prospects at larger firms, there are likely also some lessons to learn from smaller firms.
25% 23% 29% 28%
21%16%
26% 33%
54% 61%44% 39%
$2.5B+ Firms
All Firms $1B–$2.49B Firms
< $1B Firms
$2.5B+ Firms
As firms grow larger, they tend to be less reliant on client referrals to drive new business
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Appendix
For institutional use.
Financial Metrics by Firm Size
23
1 Median.2 Mean.NA: Data unavailable due to insufficient sample.* Caution: Based on small sample.Source: 2021 Fidelity RIA Benchmarking Study. For institutional use.
Metric All FirmsFirms by Total AUM Ranges
<$100M $100M–$249M $250M–$499M $500M–$999M $1B+
Number of Clients1 354 NA 175 167 526 951
Assets Under Management (Millions)1 $606 $79* $166 $344 $719 $2,903
Total Revenue (Thousands)1 $3,286 NA $1,111* $1,992 $4,700 $13,022
Revenue Yield (Basis Points)1 61 NA 71* 63 68 54
Marketing and Business Development Expense (Thousands)2 $41 NA $15* $22 $57* $166
Marketing and Business Development Expense (% of Revenue)2 1.2% NA 1.4%* 1.1% 1.2%* 1.3%
Earnings BeforeOwners’ Compensation (EBOC) (Thousands)2 $1,875 NA $586* $1,237 $2,706* $6,835
EBOC Margin2 57% NA 53%* 62% 58%* 52%
Number of FTEs1 9.0 2.0* 4.0 6.0 10.5 32.0
% of Total FTEs Who Are Female 40% 23%* 41% 38% 39% 44%
Number of Owners1 2.0 1.0* 1.0 2.0 3.0 6.0
% of Individual Owners Actively Working at the Firm Who Are Female 17% 11%* 23% 20% 8% 20%
Revenue per Client1 $10,086 NA $6,448* $10,542 $8,817* $16,582
Total Clients per Advisor1 89 NA 100* 88 118 74
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The 2021 Fidelity RIA Benchmarking Study was conducted between March 26 and May 26, 2021; 211 firms participated. The 2020 Fidelity RIA Benchmarking Study was conducted between March 10 and May 20, 2020; 188 firms participated. The 2018 Fidelity RIA Benchmarking Study was conducted between July 24 and September 24, 2018; 355 firms participated. The 2017 Fidelity RIA Benchmarking Study was conducted between April 19 and June 6, 2017; 408 firms participated. The 2016 Fidelity RIA Benchmarking Study was conducted between April 27 and June 16, 2016; 402 firms participated. The 2015 Fidelity RIA Benchmarking Study was conducted between April 21 and June 15, 2015; 441 firms participated. The 2014 Fidelity RIA Benchmarking Study was conducted between May 6 and June 30, 2014; 411 firms participated. The 2013 All benchmarking studies were conducted in collaboration with independent third-party research firms unaffiliated with Fidelity Investments. The experiences of the RIAs who responded to these studies may not be representative of the experiences of other RIAs and are not an indication of future success. Registering for, completing, and accessing these studies required access to and use of third-party websites, operated by independent third-party research firms unaffiliated with Fidelity Investments.The 2021 Fidelity Financial Advisor Community—Outsourcing Survey was an online blind survey (Fidelity not identified) and was fielded during the period April 21 through April 30, 2021. Participants included 451 advisors who manage or advise upon client assets either individually or as a team, and work primarily with individual investors. Advisor firm types included a mix of banks, independent broker-dealers, insurance companies, regional broker-dealers, RIAs, and national brokerage firms (commonly referred to as wirehouses), with findings weighted to reflect industry composition. The study was conducted by an independent firm not affiliated with Fidelity Investments. The 2020 Fidelity Investor Insights Study was conducted during the period October 15 through October 24, 2020. It surveyed a total of 1,181 investors, including 560 millionaires. The study was conducted via a 25-minute online survey, with the sample provided by Brookmark, a third-party firm not affiliated with Fidelity. Respondents were screened for a minimum level of investable assets (excluding retirement assets and primary residence), age, and income levels.
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