Fidelity® Finds High Performing RIA Firms Are Seeing 1.5x the Growth, 1.3x the Profitability and 1.5x the Productivity of Other Firms

The 2013 Fidelity RIA Benchmarking Study Reveals Smart Technology Adoption Contributing to High-Performing Firms’ Success

BOSTON – Fidelity Institutional Wealth Services®i, a leading custodian for registered investment advisor (RIA) firms, today released findings from The 2013 Fidelity RIA Benchmarking Studyii, which found “High-Performing Firmsiii” are seeing 1.5x the growth, 1.3x the profitability and 1.5x the productivity of “All Other Eligible Firmsiv.” The study explored the factors contributing to High-Performing Firms’ success, and found that while focusing on a range of areas was important, these firms also have in common a focus on smart technology adoption.

Performance IndicatorHigh-Performing FirmsAll Other Eligible Firms
Growthv15 percent10 percent
Profitabilityvi67 percent50 percent
Productivityvii$333,000$219,000
Clients Per Advisorviii9368
Assets Under Management (AUM) Per Advisorvi$117M$81M
Revenue Per Advisorvi$910K$542K
Assets from New Clientsiv9 percent8 percent
New Assets from Existing Clientsiv8 percent5 percent
Assets Withdrawn by Existing and Departing Clientsiv-5 percent-9 percent
Close Business in 2 or Fewer Meetings77 percent57 percent
State of Technology Environment – Strong, Not Cutting-Edge74 percent53 percent
Source: The 2013 Fidelity® RIA Benchmarking Study

“High-Performing Firms are growing faster and smarter than other firms, reporting a growth rate that is 50 percent higher than that of All Other Eligible Firms,” said David Canter, executive vice president and head of practice management and consulting, Fidelity Institutional Wealth Services. “In addition to attracting and retaining more of the right clients, High-Performing Firms are focusing on more effectively harnessing the technology they have instead of chasing the very latest innovations.”

According to the study, High-Performing Firms were focused on creating strong technology environments by investing in their current systems:

• Seventy-four percent of High-Performing Firms described their technology environment as strong, not cutting-edge.

• While they recognize the importance of investing in technology – it is a strategic priority for 47 percent of High-Performing Firms, as compared to only 34 percent of All Other Eligible Firms – only 12 percent of High-Performing Firms invest in the “latest and greatest” technology.

• When it comes to their biggest technology opportunity, 67 percent of High-Performing Firms ranked integrating existing systemsix in their top three opportunities.

The study found that this pragmatic approach to technology may be rooted in High-Performing Firms’ concern about disrupting their business and delivering excellent client experience in order to integrate the latest technology:

• High-Performing Firms were more likely than All Other Eligible Firms to say disruption to their business is their biggest challenge when integrating systems (60 percent compared to 43 percent of All Other Eligible Firms) and less likely to cite cost or staff skillset.

• High-Performing Firms were more likely to cite improving their clients’ experience and satisfaction as a top technology goal (77 percent vs. 61 percent of All Other Eligible Firms).

“When it comes to smart technology adoption, it’s no longer just about improving efficiency. RIA firms need to stop and ask – is this helping me grow my business? Does this enhance my clients’ experience?” continued Canter. “As new technologies come to market, RIA firms that see technology as a vehicle for success—not a measure of success—will rise to the top.”

The study also explored strategies that may help advisors build on their efforts to adopt technology in a smart and efficient way. RIA firms may want to considerx:

• Initiatives that streamline their technology environment, such as shifting to cloud-based solutions, implementing mobile technologies and creating process workflows and automation.

• Overcoming one of the biggest barriers to technology optimization: people, as the study found the top three barriers were staff related. Addressing these challenges may help firms get more out of their existing technology.

• Utilizing more functionality of current systems. The study found that those most satisfied with their systems are the firms that are utilizing the most functionality.

• Leveraging vendor-hosted systems in order to relieve the burden of supporting locally installed systems.

• Outsourcing, particularly for key processes, such as data reconciliation and client reporting.

Fidelity’s Technology and Operations Consulting offering helps RIA firms understand the importance of smart technology adoption and offers a comprehensive, practical approach to evaluating a firm’s readiness for change. Fidelity’s latest resource, Enabling the Next Wave of Growth with Workflows, was designed to help RIA firms better understand how to implement workflows that could positively impact both client and employee experience. For more details, visit http://go.fidelity.com/benchmarking2013.

About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.6 trillion, including managed assets of $1.9 trillion, as of December 31, 2013. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

i Clearing and custody provided by National Financial Services LLC.
ii The 2013 Fidelity RIA Benchmarking Study (“the Study”) was fielded from 5/1/2013 - 6/28/2013. 325 firms participated in the Study. Fidelity was identified as the Study sponsor. The Study was administered by an independent third-party research firm, unaffiliated with Fidelity Investments.
iii Refers to firms identified in The 2013 Fidelity RIA Benchmarking Study. For purposes of the Study, Fidelity classifies “High-Performing Firms” as those advisory practices that demonstrate excellence (top 25 percent) in the areas of growth, profitability and productivity. In order to be deemed a “High-Performing Firm,” participants in the Study were required to meet certain criteria. Reference to the concept of "performing" in the name of the group is not intended to connote investment returns.. Past performance is no guarantee of future results.
iv Firms that did not rank in the top 25% of firms eligible to be High-Performing Firms. To be considered eligible, firms had to meet the following criteria:
1) their practice was established prior to December 31, 2009, 2) they had assets under management (AUM) of $50M or more as of December 31, 2009, 3) they had two or more full-time employees as of December 31, 2012, and 4) their merger or acquisition activities contributed no more than 25% of the change in AUM between 2010–2012.
v 3 year Assets Under Management (AUM) Compound Annual Growth Rate (2009-2012)
vi 2012 Earnings Before Owners’ Compensation (EBOC) Margin; EBOC Margin = EBOC as a % of revenue
vii 2012 Revenue per Full-Time Equivalent (FTE)
viii Values represent 2012 median data
ix It should be noted that there are various definitions and levels of integration. For purposes of the study, integration was defined in terms of three levels: Limited integration (e.g., systems updated via a file delivery process), Moderate integration (e.g., automated data synchronization), or Full integration (e.g., automated synchronization with single sign-on and seamless user interface).
x These strategies may have legal and compliance considerations to take into account.