The RIA industry continues to grow.
Nearly 14,000 investment advisors registered with the Securities and Exchange Commission (SEC) have reported nearly 61 million clients in 2020, according to a joint study by the Investment Adviser Association and National Regulatory Services. Both numbers are new highs for the industry.
There are now 13,880 registered firms, up about 3% from last year. These firms served 17% more clients in 2020 than the year before. Asset management clientele rose 18%, while non-asset management clientele, who exclusively received financial planning or other advice, rose 13%. The individual client segment grew 17.5% last year and 38% in the last two years, vastly outpacing other types of clients such as pooled vehicles and institutional investors – an apparent indication that individual investor demand for advice is ‘surging’.
Particularly disruptive in the individual client tract, according to the report, are ‘digital advice platforms’ – also called robo-advisors.
‘The two largest firms serving non-high net worth individuals (as measured by number of clients) are both new entrants to the business providing Internet-only services,’ the report states.
Cash concentration
The industry’s total assets under management grew by a whopping 13.2% to $110 trillion, in part due to the market’s sharp rebound following the spring crash caused by the onset of the pandemic.
‘Most growth by the larger firms resulted from market-driven appreciation in the value of assets under management, organic growth (from increased investor demand for products and services offered by these advisers) and merger and acquisition activity,’ the report explains.
On the other hand, boutique firms with less than $100m in assets ‘generally declined’ in numbers.
Compensation and staffing
Data shows that while most firms bill clients based on their assets under management, compensation structures are increasingly flexible, with 45% of advisors offering a fixed rate, 36% offering a performance-based rate, and 30% offering hourly billing options. Unsurprisingly, transaction-based fees are trending down.
Finally, in terms of employment, 2020 was the fourth consecutive year of growth for the RIA industry. The number of non-clerical employees rose by 7,784 to 879,755 – another record high. Registered investment advisors account for about 38% of those total employees.
Interestingly, the pandemic year and changes to office culture resulted in a loss of 91 advisors for the state of New York. Florida saw the largest gains, with 69 incoming advisors – a microcosm of a larger national trend.
This article originally appeared on CityWire.
