Ensemble survey: RIAs above $1B lost 4.3% of clients in 2023, below $500M 1.4%

RIAs above $1 billion lost 4.3% of their clients in 2023 while firms below $500 million lost 1.4%, according to a new survey from Ensemble Practice. Philip Palaveev attributes the 2.9-point gap to a condition consolidators rarely mention: the people serving clients at the largest firms often hold no equity in the business.

Translated to a 2,000-relationship book, the higher rate costs 86 clients a year against 28 at the smaller-firm pace, a gap far beyond how firms round their client counts and closer to the difference between keeping a book and leaking it while assets rise.

Palaveev's explanation carries an uncomfortable logic for consolidators, because an owner who holds equity wins or loses with the client while the compensation of an employee without equity is less directly tied to whether a family stays for a decade or leaves after the first market shock. When a practice scales through acquisition, the service layer often remains employees—paraprofessionals, newer advisors, and operations staff—rather than the principals who signed the deal, which the survey suggests is what raises attrition.

The smaller firms in the survey offer a natural comparison: a sub-$500 million practice is likelier to have the founder in the client meeting, with an owner's time and reputation riding on the relationship. Scaled platforms have not always reproduced that owner's stake for the people who inherit the day-to-day work, leaving a client-retention pattern that differs even when investment philosophy, reporting, and fee schedule look the same.

Client attrition is a quieter metric than asset growth; a firm can lose 4.3% of its clients and still report higher AUM if markets rise or if remaining clients consolidate assets, which lets the retention problem hide inside a strong quarterly number. The survey's focus on clients, not assets, exposes the leak: the firm is getting bigger while its relationship base is getting thinner, a trade that cannot hold.

That reading should change how a buyer prices a deal. The accepted shorthand in RIA M&A is that a firm's value sits in its revenue run-rate and client assets; the Ensemble data suggests a third variable belongs on the spreadsheet—whether the people with the client relationships have a reason to keep them. A $1 billion practice shedding clients at 4.3% presents different retention math from a $500 million practice at 1.4%, and the acquired clients may begin leaving before the earnout ends.

The arithmetic makes the case for urgency. If a buyer pays a premium for a $1 billion practice and then loses clients at the survey's 4.3% rate, the acquired revenue base shrinks before integration costs have been absorbed. That loss may not show up immediately in asset totals if markets rise, but the relationship count is the raw material of future referrals, planning fees, and next-generation business; a buyer who treats client attrition as a soft metric is underwriting a leak.

For deal teams, the practical step is to make service continuity an acquisition condition. Before signing, ask which employees actually sit in front of the largest client households, what equity or deferred compensation they hold, and whether those incentives survive the transaction or reset under the buyer's plan. If the principal owns the equity and the service team owns none, the buyer should price that as a known retention risk or fix it before close.

The survey does not say that every large RIA has a service-team equity problem, and it does not compare the same firm before and after an acquisition. But it gives acquirers a way to test the risk: ask what the attrition rate is for the specific book being bought, and ask what equity sits with the people who answer the phones and sit in the annual reviews. Those are cheap questions compared with the cost of discovering the answer after the wire has settled.

The consolidation wave has been built on the idea that scale makes a practice more durable. Ensemble's numbers undercut that assumption at the service layer, and Palaveev has put the reason on the record. The buyer that ties retention to employee ownership before close will not have to learn the 4.3% lesson on its own P&L.