For one thing, these firms accelerate their growth rate through client referrals. In 2023, high performers received about the same number of opportunities as their peers but closed them at a higher rate, resulting in about a third more clients added in 2023.
For another, high-performing firms maintain better pricing discipline. Fidelity noted that as RIAs expand the breadth of their services to better compete, they commonly add new services without assessing an additional fee, thereby eroding revenue and profitability.
Fidelity’s study showed that high-performing firms, in contrast to their peers, do a better job at maintaining pricing discipline. They offer smaller discounts, on average. The difference between their actual and expected revenue based on stated fees is 17 basis points, compared with 23 points for other firms.
Moreover, only 10.5% of high performers bundle 10 or more services under a single fee, versus 18.5% of other firms that do so.
High-performing firms are also better at controlling expenses. This includes both keeping overall expenses down and maintaining this discipline across a range of expense categories.
Their overall expenses represent 74% of revenue, compared with 85% of revenue for other firms. Fidelity said this differential is driven by consistently lower expenses in categories outside compensation.
In fact, out of the 21 categories of expenses asked about in this group, high-performing firms were lower or on par in all but one of them — professional services: taxes, excluding payroll taxes.
