Pershing Study Shows that Avoidable Inefficiencies Threaten RIAs' Profits

May 30, 2012

New Pershing Study Highlights Key Strategies to Help RIAs Improve Operations and Boost Bottom Lines

JERSEY CITY, N.J. — Pershing, a BNY Mellon company, today released a new study highlighting the challenges registered investment advisors (RIAs) are facing to remain profitable. The report, Mission Possible III: Strategies to Sustain Growth in Challenging Times, reveals that workflow and operations management is a prevalent problem—particularly as businesses increase in complexity. Although some RIAs have been able to regain profitability in the challenging market environment, rising operational costs are a threat and greater emphasis needs to be put on properly managing expenses and improving productivity.

In recent years, total overhead spending by RIAs has increased 10 percent, and overhead expenses on a per-client basis rose 5.2 percent each year between 2008 and 2010, according to the study. Many RIAs are not making the operational changes to the way they do business to succeed in the current margin-compressed environment.

"The constraints of the financial crisis created a need for RIAs to streamline operations. Unfortunately, our study found that many have not adapted and are literally paying the price," said Kim Dellarocca, director and head of segment marketing and practice management at Pershing. "Firms can be better at managing operating costs, especially labor costs, which can be a serious drag on the bottom line."

This new Mission Possible study, the third in a series of issue-focused research efforts, was developed by Pershing Advisor Solutions and FA Insight, a leading research firm focused on providing analysis of financial services firms and their business environment. As expense management, achievement of efficiencies and overall productivity continue to be a business challenge, RIAs should consider three critical steps to help them run their business more efficiently:

  • Identify the ideal client profile so that success can be replicated. Understanding the distinctive needs of a given market segment is the first step towards building an operational infrastructure that delivers superior client satisfaction and drives profitability. Targeting more homogenous clients enables greater operational efficiency because supporting processes can be more focused and easily copied. According to the research, those surveyed who focus on a well-defined market reported 2.4-3.5 times greater profitability per client than those who didn't.
  • Design the workflow to deliver a unique and powerful client experience while creating maximum value for the firm. Workflow management can help control costs when a firm becomes more complex. In 2010, only 41% of RIAs reported that they document all major business-to-client processes. And, only 32% of firms are consistent in the implementation of their workflow processes.
  • Align human capital needs with the business goals through effective organizational design. Poor application and alignment of people create challenges that even the best workflow systems cannot circumvent. About one in four professionals is over capacity. However, firm owners should resist the temptation to hire new team members or rush to invest in technology to resolve a capacity issue. It may be more appropriate and cost-effective to address an imbalance between professionals and their support staff, ineffective workflow or a lack of role clarity. Technology cannot relieve capacity without an accompanying investment in planning and training time.

About BNY Mellon's Pershing

BNY Mellon’s Pershing and its affiliates provide advisors, broker-dealers, family offices, hedge fund and ’40 Act fund managers, registered investment advisor firms and wealth managers with a broad suite of global financial business solutions. Many of the world’s most sophisticated and successful financial services firms rely on Pershing for clearing and custody, investment and retirement solutions, technology, enterprise data management, trading services, prime brokerage and business consulting.

Pershing helps clients improve profitability and drive growth, create capacity and efficiency, attract and retain talent, and manage risk and regulation. With a network of offices worldwide, Pershing provides business-to-business solutions to clients representing approximately 7 million investor accounts globally. Pershing LLC (member FINRA, NYSE, SIPC) is a BNY Mellon company. Additional information is available on, or follow us on Twitter @Pershing.

About BNY Mellon

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries. As of June 30, 2019, BNY Mellon had $35.5 trillion in assets under custody and/or administration, and $1.8 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on Follow us on Twitter @BNYMellon or visit our newsroom at for the latest company news.