The growth of RIA firms continues, fueled by recruitment, breakaway brokers and clients putting more money into the channel, according to a study by the market research firm Cerulli Associates. Bigger firms (those with more than $1 billion) are gaining market share more quickly and achieving scale — but lack of access to capital is limiting them. Smaller firms (those with less than $100 million) are struggling, especially with maintaining sustainable price points. Hybrids or dual registered advisors grew fastest, with 17% indicating that they are willing to drop their broker dealer affiliation.
These trends seem to mirror developments in the DC market, with most experienced advisors charging fees in the mid-market — even wirehouses, which are creating specialty groups. Most small market providers — even the insurance companies that dominate that sector — have fee-based products. As with the overall RIA channel, larger DC practices are growing faster and attracting more advisors, though access to capital is limited.
An advisory practice is harder to scale than, for example, record keeping and asset management, since it is really a consulting practice at its core — demanding significant time and attention from the principals. Sharing services, outsourcing non-core functions to third parties and recruiting or merging with other advisors or other types of practices will be necessary to survive and grow in a deflationary market. Finding capital can be a challenge, as is acquiring the business acumen to manage larger organizations.
