RIAs Race to Provide HNW Services
The registered investment advising (RIA) industry has undergone substantial changes this year compared with 2023 as an increasing number of businesses are providing high-end services, implementing long-term succession planning, and closely monitoring regulatory trends.
The percentage of RIA firms that claim to provide “family office” services has more than doubled to 41% in 2024 from 20% in 2023, Raymond James’ RIA & Custody Services division revealed in its annual benchmarking survey. Equally, the proportion of RIAs providing investment banking rose to 26% from 15%, while the rate of RIAs supplying trust services jumped to 68% from 48%.
This year witnessed a significant rise in the share of Raymond James’ RIA clients who oversee assets ranging from $500 million to $1 billion, which is mostly in line with the wider growth in the industry. Furthermore, companies that have more than $500 million in assets under management often engage an average of 476 clients, and those with assets below $25 million have an average of 94 clients.
The overwhelming majority of participants still indicate that their primary business activity is financial advice and planning, although more than 20% emphasize their asset management expertise.
The data reveals that RIA firms are progressively aiming to cater to the intricate financial requirements of affluent and high-net-worth clients, in accordance with a business strategy that prioritizes larger client connections and wider service models. While most family office services are supplied in-house, most respondents’ organizations used referral agreements to provide trust and investment banking services.
Succession planning also ascended on the list of top day-to-day challenges to sixth place in this year’s survey from seventh place last year. Raymond James discovered a substantial increase in the number of firms that have established a documented, long-term succession plan, which has increased by 40% since last year. Currently, 70% of firms have a succession plan in place, and 87% have a catastrophic event plan.
Not all aspects of advisors’ profession are evolving at the same pace, however. A significant majority of respondents, 85%, indicate they employ model portfolios consisting of individually managed accounts or exchange-traded funds as the primary component of their portfolio plans. Still, this is below 2023 rates, when 96% of respondents claimed they employed firm-driven model portfolios.
The research suggests this could reflect changing RIA firms’ investment management practices, but it is more likely the outcome of the survey now asking if respondents employ mutual fund asset allocation since roughly 52% of respondents say they do.
Advisors’ approaches are also evolving in relation to their specific target client niche. When compared to 2023, 69% more RIAs now indicate they prioritize health care providers, and an additional 60% of respondents prioritize attorneys. Approximately 52% of the respondents are targeting women investors, while 50% of the respondents are targeting foundations and endowments.
Meanwhile, the top challenge is no longer growth but compliance demands. Technology infrastructure, cybersecurity and talent management, along with profitability, rounded out the list of top challenges.
Overall, rates of technology use for back-office and client-facing tasks were consistent when compared to 2023, with most respondents saying that they utilize client relationship management, financial planning, trade order management, and portfolio accounting software. Estate planning technology was the only category that saw a significant increase in use year on year, rising by more than 33%.
Not unexpectedly, considering the focus on compliance and technology, as well as the recent series of multimillion-dollar fines for employees using unapproved communication channels, 76% of companies express a desire to create text messaging systems that comply with the regulations set by the Securities and Exchange Commission.
The survey was fielded from March 14 through April 26 and included responses from 165 RCS principals.
