Murphy Capital Advisors is a small, fast-growing firm that did not have to try very hard to expand its business during the last three years.
It says it scooped up clients who had become fed up with wire houses and had sought it out for its fee-only model.
The tricky part was how to manage those clients under an unfamiliar business model. The Glendale, Ariz., firm may get a better sense of how it is doing from its custodian, the adviser services division of Charles Schwab Corp., which issued its 2010 RIA Benchmarking Study this month. Murphy Capital, a study participant, also is to get a follow-up Peer Benchmarking Report.
About 870 independent registered investment advisers were interviewed in February and March about their companies' status through yearend 2009. The study found 84% of respondents hoping to expand their businesses aggressively or moderately in the next five years.
Anecdotally, respondents said they were being more disciplined about using marketing and business development strategies to grow, said Scott Slater, managing director of business consulting at Schwab Advisor Services.
Murphy Capital has expanded its assets under management by 107%, to $50 million, since mid-2007. Like many of his peers, President Matthew J. Murphy said he thinks using technology plays an important role in practice management.
"The key advisers and principals here are wearing multiple hats, so you have to be strategic about how you meet clients," Murphy said. The challenge in using technology is not the initial outlay, he said. Setting up a system and learning how to use it effectively takes a lot of time but in the end is worth it, he said.
"Principals are increasing their efforts to get others in the firm — the ones who serve clients — to contribute," Slater said. "They are saying, 'We are institutionalizing how we grow.' "
Many firms' principals realize that referrals from clients and other types of professionals power their growth, he said, and they are committed to finding out how to maximize this.
Firms' revenues slipped 11% last year, the study said; median revenue was $1.2 million, compared to $1.3 million in 2008. Median operating income at RIA firms also slipped, to 10.1%, from 15% in 2008. Revenue per client was $6,900 last year, down from $7,800 in 2008. Yet firms remained positive, saying they hoped for 10% revenue growth this year.
The study also found that 95% of advisers plan to use technology more efficiently and that 88% had bought technology to enhance client service. Respondents said investing in technology is a strategic priority, and 73% described themselves as moderate or aggressive adopters.
They use technology to increase efficiency and serve clients better, plus scaling their businesses for the future (85%), reducing risk and potential for error (84%), differentiating from competitors (50%) and serving new types of clients (30%).
Advisers in the study said technology saves 18% of their time and that the most commonly used systems are ones for portfolio management (95%), client relationship management (84%) and e-mail retention (78%). In particular, advisers said that their satisfaction with CRM software grew as they used more system applications.