OPINION: The dirty little secret about RIA organic growth (2024)

Last fall, a series of statistics were published regarding organic growth in the registered investment advisor (RIA) industry, making clear what many people have whispered for years: Organic growth among RIAs is anemic. Fidelity published a report showing that larger firms had 3.6% organic growth in 2023, while smaller ones experienced even less at 3.2%.

Further, at his fall Tiburon Research conference last year, CEO Chip Roame shared research indicating that the figure was even worse, with net flows of just 2.4%. Roame wondered aloud from the stage whether, with inflation being what it is, we can even call this business a growth industry. While ~3% growth isn’t zero, we likely wouldn’t put our clients in stocks growing at those rates unless they were paying dividends. But then again, we wouldn’t call those stocks growth investments, right? Roame also stated that 77% of all RIA flows go to the top 6% of firms, meaning that the median RIA is actually shrinking, not growing.

Simply put, organic growth is the measure of how much a practice grows or shrinks independent of market performance. If we’re measuring growth in assets under management (AUM), organic growth would refer to new assets from existing and new clients, minus withdrawals and terminations. To paint a simple picture, if an RIA started the year with $200m in AUM, it could look like this over one year: