The Oasis Group, a leading technology consulting firm specializing in wealth management, in collaboration with AdvisorEngine Portfolio Solutions, Inc. (AEPS), released a new whitepaper titled “Scale to Win: Examining the RIA Growth Model.“

The whitepaper provides an exclusive data-driven framework for Registered Investment Advisors (RIAs) managing between $100 million and $1 billion in assets under management (AUM) to overcome the “operational paradox” that often halts firm growth.

RIA success creates its own operational drag, The Oasis Group found. As firms add clients, principals find themselves increasingly consumed by non-revenue-generating tasks such as portfolio rebalancing, trade execution, and technology administration.

“The paradox compounds; each new client adds administrative load that current operating models absorb imperfectly,” said The Oasis Group CEO John O’Connell. “Principals find they are not building a firm; they are buying time in six-month increments against a problem that requires a fundamental shift in the operating model.”

The whitepaper highlights a stark divide in industry economics. A RIA benchmarking study from Fidelity found advisory expenses at smaller RIAs reached 82% of revenue, leaving record-low operating margins of just 18%. In contrast, the same study found that most profitable firms hold overhead to just 25.7% of revenue while serving nearly double the number of clients per professional.

A critical “force multiplier” for firms is gained by combining platform automation with outsourcing through turnkey asset management programs (TAMPs) – AEPS, for instance, lets advisors manage their practice across a variety of investment approaches with flexibility in how they oversee different client segments, and provides automated tax-loss harvesting, customizable transition rules, and lot-level tracking to help RIAs onboard assets thoughtfully and manage portfolios with precision.

“Advisors don’t need to work harder; they should benefit from infrastructure that handles complexity without removing their judgment,” said Rich Cancro, CEO of AdvisorEngine Portfolio Solutions. “We believe RIAs derive the highest value from serving clients well and developing and engaging with prospects. Our conviction is that advisors need modern tools, such as expert-developed investment capabilities, that free them from administrative work so they can focus instead on scaling and growing their businesses.”

Key findings include:

• Time Recovery: Advisors who outsource investment management create eight to nine hours of extra time per week, effectively freeing up an entire workweek every month.
• Cost Efficiency: For a firm with $250 million in AUM, a full accounting of in-house operations may reveal a fully-loaded cost of 25 to 35 basis points. Transitioning to a TAMP can potentially result in significant reductions in total investment operations costs.
• Institutional Scale: Utilizing modern infrastructure allows independent firms to compete with large aggregators that possess significantly higher technology budgets.

Another pressure on RIA firms is the M&A trend sweeping the industry, the paper notes. Scalable operations reduce key-person risk, allowing firms the freedom to choose to grow their business organically or inorganically, and to have greater sway over their valuation. 

“The longer a firm delays operational restructuring, the narrower its strategic options become,” O’Connell warns. “You either build an operating model that scales, or you continue running one that trades operating inefficiency for the illusion of control.”

Beyond simply eliminating operational drag, blending modern technology and outsourcing options provides a distinct financial advantage, Cancro added. “This reclaimed margin can be funneled directly into marketing resources, allowing an advisory practice to elevate its growth curve and scale more aggressively.”

The paper is the latest in a series of thought leadership collaborations between The Oasis Group and AdvisorEngine Portfolio Solutions’ affiliate, AdvisorEngine Inc. Previous studies have detailed the use cases, benefits and providers of emerging AI tools for investment advisors.

For more information or to download a copy of “Scale to win: Examining the RIA growth model,” please visit https://advisorengine-portfolio-solutions.com/white-paper-scale-to-win-redefining-the-ria-growth-model.

AdvisorEngine will host a webinar with The Oasis Group CEO John O’Connell and AdvisorEngine Chief Growth Officer Ned Dane on May 28 to discuss the whitepaper’s findings and its framework for RIAs on managing growth. To register, please visit https://www.advisorengine.com/scale-to-win