Referrals Are Still King, Even In the Era of AI

RIA growth is showing no signs of slowing down.

Both revenue and number of clients continue to rise across the industry, according to Schwab’s annual RIA benchmarking study, which surveys more than 1,000 firms representing more than $2.4 trillion in AUM. A major part of that success has been AI, which is now being used for everything from administrative support to marketing content. However, human referrals still remain a primary method of lead generation, proving that prospects still trust human beings over ChatGPT.

“One [change] that I always look at every single year is, ‘Where’s the growth coming from?’ And it’s remarkable that it’s still client referrals … making up about 69%,” said Lisa Salvi, whose team at Schwab leads the study. “So that really hasn’t changed, even with all this digital marketing, all the podcasts people are doing. That is really interesting.”

Upping the AI Ante

That’s not to say AI hasn’t made huge impacts on the industry, with nearly 70% of reporting firms using the tools in some way last year. What’s more, “top-performing” firms — those that rank near the top of Schwab’s index, which accounts for factors like AUM growth, client and staff attrition, and compound annual growth rates — outsource operational duties to AI and spend more time on client service. Salvi said this happens because as firms reach certain benchmarks, like moving from $750 million to $1 billion in AUM, tech stacks need to keep up.

“When you’re really small, you have all this room. Your systems have plenty of capacity, and your office space is great, and your website’s looking good,” Salvi said. “But then you keep growing, and you need to think of those things a little bit differently to get ready.” According to the study:

• 43% of firms reported using AI for administrative support, like notetaking and drafting emails.
• 38% of firms said they used it to generate marketing content, including digital ads, email campaigns and social media posts.
• 31% of the surveyed respondents said they used AI to correspond with their clients.

More CRM, Please. Portfolio management systems and CRMs were reported to have the greatest impact on returns, with nearly 100% of respondents selecting them as having had the highest ROI, per the report. Top performers also used CRMs more than everyone else. “One of my key observations is that firms are signaling some capacity constraints,” Salvi said. “So technology and operational improvements are really important.”