A Resounding Message in Aon’s First-Ever RIA Report

Proper client surveys are easy and valuable. “It begs the question, why aren’t we doing more of these?”

(Illustration by RIA Intel)

(Illustration by RIA Intel)

Not all is well in the RIA universe, according to the first-ever report on RIAs made publicly available this week by Aon, the global insurance, retirement, data, and service provider with 50,000 employees, and consultants dedicated to wealth managers.

For several years, Aon has primarily consulted wealth managers with at least $1 billion (and in many cases much more) on their compensation plans and the human architecture of their firms. But it’s recently been expanding into financial benchmarking and client insights.

Much of what Aon has observed this year affirms reports by others. The RIA universe is growing — there are 18% more RIAs registered with the Securities and Exchange Commission in 2020 than in 2011 — but not every individual RIA’s future is equally rosy.

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“The outlook for the RIA sector is not all positive following a difficult 2020. Our most recent analysis indicates that median revenue growth rates had already fallen to just 3.4% for the first half of 2020, compared to 9.3% growth from 2017 to 2018,” Basel Raslan, manager of Aon’s Global Wealth Management, wrote in the report.

“Looking closer, it is apparent that the gains from growth over the past decade have mostly gone to the top end of the RIA market. According to the SEC, individual account assets under management have grown by 27% since 2011 at the 150 biggest RIA firms.”

There’s no single reason. Wealth managers that are heavy technology users have a disproportionate 46% of the market share of advisor-managed assets, giving them scale and resources to invest further in things like mobile apps and artificial intelligence. They could be failing to meet the wants and demands of younger investors. And only a short list of companies has also prolifically acquired RIAs (and their assets under management), even in 2020.

“New client assets are being won, but at the expense of smaller boutiques. Whether the result of competition, over-servicing or difficult market conditions, many RIAs are struggling to convert client centricity into stellar business performance,” according to Raslan.

But Aon says small RIAs might be able to drastically help themselves if they improved the quality and frequency of a simple, valuable tool: client surveys.

Commercially-focused questionnaires and interviews with investors have proved to identify which existing services a wealth manager can improve and new services they should consider adding.

“It begs the question, why aren’t we doing more of these?” Raslan told RIA Intel. “From our perspective [RIAs] need to get more client feedback on a more continuous basis just so that their firm can continue to grow.”

Some RIAs might be failing to effectively survey clients because they are asking the wrong questions, or have the wrong person asking them. “There is a lot of hesitancy from, not really the leadership, but from the advisors themselves. It’s understandable to a degree because they don’t want negative feedback,” Raslan said.

Interviews with clients should be conducted by a third party or an RIA’s marketing or business development team, not financial advisors. Clients need to feel comfortable giving honest feedback and that could be challenging to deliver to the person at the RIA they are closest to.

Questionnaires need to be thoughtful and give clients the option to remain anonymous, so they feel more comfortable sharing their thoughts about the firm or their advisors.

RIAs also should consider surveys for specific client segments and perform them on a routine basis to measure changes over time.

Most of Aon’s wealth management clients manage between $5 billion and $25 billion, although it has worked with firms managing less than $1 billion. Most are independent RIAs, but some are captive (owned or part of a larger organization) and they offer diverse sets of services. But Raslan said an RIA of any size can benefit from surveying their clients. It’s an inexpensive way to potentially change the trajectory of a wealth manager that can’t afford to, say, develop its own mobile app. Those firms can still compete when it comes to service.

“Margins tend to be tighter” at smaller wealth managers compared to, for example, the global private banks, Raslan said. RIAs need “every advantage you can get” and surveys can help refine and find those.

Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.

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