In my experience, if you ask a room full of advisors to raise their hands if they think their firm is above average, roughly 80-90% of the hands in the room will go up. Clearly, this is mathematically impossible! So how do you determine which firms are better than average? Clearly, it depends upon the metrics you choose to measure. In the case of the annual Schwab study, they rely upon their “Firm Performance Index.” The index measures performance in key areas including:

• 5-year client CAGR
• 5-year net asset flows CAGR
• 5-year revenue GAGR
• 2022 AUM growth from new client assets
• Client attrition
• Staff attrition
• Operating margin
• Time spent on client service
• Time spent on operations

This year’s survey reflects data from over 1,300 advisory firms that represent more than $1.7 trillion in AUM. Those firms that rank in the top 20% of firms across the Schwab metrics are considered Top Performing Firms. 

While the study covers a wide range of topics, not surprisingly, the ones that I focused on were the ones that relate primarily to technology. As the study makes clear, there are certain characteristics that top performing firms have in common that are technology related. Most of these come as no surprise to me, but they validate much of what we have been telling advisors for years. 

• Technology is essential for client connections and operations
• Technology systems that have the greatest impact on ROI in 2022 were:
  • Portfolio management systems
  • CRM
  • Financial planning software
• Document management systems exhibited the greatest growth in acknowledged importance vs 2019. Our thesis is that as firms grow, managing the volume of documents becomes a challenge for those who do not have sufficient capabilities.
• Top Performing Firms more often use their CRM as the central hub to serve clients more consistently.
  • Traditionally, CRM has been the hub of information in the typical RIA firm. With the advent of more sophisticated business intelligence tools, the challenge of integrating multiple software, and AI, it remains to be seen if CRM can continue in this role, or if proprietary data warehouses become essential for the growth-oriented RIA firm of the future.
• Top Performing Firms implemented digital processes more often to drive operational efficiencies
  • 100% of top performing firms have adopted digital signatures for custodial forms
  • 93% of top performing firms have adopted digital signatures for firm specific forms
  • 58% of top performing firms (vs 47% for the rest) have adopted online scheduling
• By improving security, consistency, and efficiency, digital client onboarding helps reduce fraud and rework
  • Top performing firms exceed the rest in all of these categories:
    • Digital account opening
    • Digital account funding
    • Digital general notices
    • Digital client agreement and welcome letter
    • Digital client data collection
• While not directly correlated with technology, the following are enabled by technology
  • Personalization in investment management strategies can give RIAs an edge 
  • • Advisors offer personalized investment strategies to help tie meaning to clients’ investing, beyond returns. Customized investing vehicles include direct indexing, value-based/impact investing, thematic investing, and separately managed accounts. 
  • • By leveraging behavioral finance, advisors delivered more impactful client experiences by increasing client satisfaction. Nearly half of firms reported using behavioral finance for more than 50% of client interactions and firms using BeFi saw 3.3x more new assets from existing clients in 2022.
• Talent, another area that is not thought of as technology related, actually is!
  • Firms are focused on cultivating talent internally—developing staff capabilities and skills moved up four spots in the ranking of strategic priorities from two years ago. 
  • Developing these capabilities often focuses on improving the technical skills of employees necessary to excel in an increasingly digital environment.