“Calculated Aggression” Distinguishes the Best Firms from the Good Firms, Pershing Study Says

September 24, 2014

Top-Performing RIAs Implement Offensive Positions to Yield Exceptional Growth Results

JERSEY CITY, N.J. - Registered Investment Advisors (RIAs) who implemented “calculated aggression” across a variety of business areas— defined as assertive, but not reckless, strategic business management choices that are deliberate, proactive and planning-centric— grew their median revenue at more than double the rate of their competitors, according to new research released today from Pershing Advisor Solutions LLC, a BNY Mellon company. The study, Mission Possible IV: Three Pressure-Tested Growth Strategies of the Industry’s Leading RIAs, provides a review of historical advisory firm performance from 2008-2012 to determine best practices that have worked over time to help elite firms outperform their competitors.

According to the study, RIA firms who embodied calculated aggression generated a 29 percent profit margin— more than double the 13 percent margin achieved by other firms during the four-year data set. During the same period, leading firms managed to increase their profit margin by 10 percentage points on average, while firms who did not practice calculated aggression declined by three percentage points.

“In the aftermath of the recession, leading firms took offensive positions with bold and assertive decisions to achieve growth,” says Gabriel Garcia, director of relationship management for Pershing Advisor Solutions. “While their competitors were making defensive choices that focused on cut-backs and reducing fees, top firms were looking ahead and making changes that would help better position their organizations during an economic recovery.”

The report identifies three pressure-tested growth strategies used by these industry leaders:

Human Capital: maintaining capacity for capitalizing on the next opportunity

Top firms used organizational structure planning to accommodate growth opportunities and improve advisor capacity for revenue generation. With more time to allocate to revenue generation, leading firms had 35 percent higher revenue per professional in 2012. When implementing this strategy, RIAs should keep key considerations in mind:

  • Prepare for the long haul: Firms should have a long-term investment plan and resist the temptation to abruptly change course as a result of short-term economic volatility.
  • Prime the pump by hiring and defining: Leading firms minimize the risk of inappropriately expanding their teams by clearly defining the organizational structure of existing roles and responsibilities.
  • Push non-professional staff: Instead of hiring more advisors, the most cost-effective way to increase advisor capacity and productivity is to surround them with the right mix of non-professionals so that advisors can dedicate more of their time to their clients.

Technology: optimizing technology is about more than just “buying something”

Leading firms are dedicated to training and focusing on linking technology with process improvement. Leading RIA firms are also more likely to have disciplined spending practices to help ensure that the right technology purchases are made, and are more likely to provide adequate technology-related training. Three key considerations for firms pursuing a technology optimization strategy include:

  • Set technology acquisition guidelines: Consistent application of guidelines and ROI analysis to the technology procurement process will help to avoid reactive purchases and ensure that an investment is consistent with the business strategy.
  • Support technology with training: Training is critical to maximizing the usefulness of new technology and should be incorporated into a technology budget.
  • Seek technology with processes to unleash efficiency and productivity: It is essential to recognize the potential efficiency and productivity gains from integrating technology into firms’ business-to-client processes. Firms can also leverage their custodian to help integrate new technology.

Pricing: compete on value instead of price

Leading firms compete on value instead of price. They are confident about a premium pricing strategy because they understand the value their services represent for clients and are able to clearly articulate their worth. Pricing considerations to keep in mind include:

  • Understand your cost to service clients: Firms should seek to understand their costs down to certain client types and use the cost of service as a foundation for evaluating current pricing.
  • Uncover your value story: The ability to articulate and demonstrate value beyond investment returns can support premium pricing and defend against the temptation to cut price levels in declining markets.
  • Underscore communications: There should be a plan for communicating and implementing new pricing with clients and then selectively transitioning existing clients to the new structure.


About Pershing Advisor Solutions

Pershing Advisor Solutions LLC (member FINRA/SIPC) is an affiliate of Pershing LLC and a leading provider of financial business solutions to independent, fee-based registered investment advisors and dually-registered advisors working in conjunction with many of Pershing LLC's introducing broker-dealer customers.

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 23 offices worldwide, Pershing provides business-to-business solutions to clients representing more than 7 million investor accounts globally. Pershing LLC (member FINRA, NYSE, SIPC) is a BNY Mellon company. Additional information is available on pershing.com, 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 and more than 100 markets. As of Dec. 31, 2017, BNY Mellon had $33.3 trillion in assets under custody and/or administration, and $1.9 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 www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.