The Registered Investment Adviser profession experienced healthy growth last year, with record numbers of firms, employment, client demand and increased regulatory assets under management (RAUM), according to an annual report that profiles the profession.
While digital advice platforms and passive investment channels are playing greater roles, “investors’ appetite for human-driven investment advice clearly remains strong,” the Investment Adviser Association and National Regulatory Services explain in their 2019 Evolution Revolution report.
Based on information filed by SEC-registered investment advisers electronically from April 2019 on Form ADV, Part 1, the study found that the universe of SEC-registered investment advisers has reached a record high of nearly 13,000 advisory firms – up 3.3% since last year’s report. And despite significant market declines in December 2018, RAUM increased to $83.7 trillion in 2019 from $82.5 trillion in 2018.
The study also suggests that small businesses are the core of the investment adviser community. In 2019, nearly 57% (7,387) of advisory firms reported that they employ 10 or fewer non-clerical employees and 87.5% (11,367) reported employing 50 or fewer non-clerical individuals. At the opposite end of the spectrum, the largest 116 firms employ 53.3% of all non-clerical employees.
“Our profession is experiencing continued growth as increasing numbers of investors recognize the value of fiduciary advisers,” notes IAA President and CEO Karen Barr. “This year’s report demonstrates that advisers are continuing to fuel the economy and the capital markets, providing high quality jobs and adding new small business players in the financial services ecosystem.”
Other key findings include:
- SEC-registered advisers reported a total of more than 43 million clients, up 9 million from last year, which may be attributed in part to digital advice platforms having many clients with small or zero account balances.
- The RAUM that RIAs now manage has nearly quadrupled 2001’s total. The total industry aggregate AUM/RAUM has grown 279% since 2001 – a compound annual growth rate of 8.2%.
- The bulk of RAUM resides in pooled vehicles. Registered investment companies ($28.1 trillion) and private investment vehicles ($22.2 trillion) together represent $50.3 trillion ( 60.2%) of the total $83.7 trillion RAUM. The number of private investment vehicle clients is up by nearly 19%.
- The recent trend toward increased industry concentration continued this year, with a majority of all RAUM being managed by a very small group of large advisers. The number of advisers that reported managing over $100 billion in RAUM remained steady, increasing by just one (to 148) following last year’s 18.5% increase, the report notes. Despite accounting for only 1.1% of SEC-registered advisers, those 148 firms collectively managed nearly 60% of all reported RAUM, or $49.9 trillion.
- At the other end of the spectrum, 71.5% of all advisers managed less than $1 billion RAUM, and they collectively managed only 3.1% of all reported RAUM, or $2.6 trillion.
Individual clients (94.6% of total clients) – in particular, non-high net worth individuals (82.2% of total clients and 87% of individual clients) – comprise the majority of clients by a wide margin. High net worth individuals make up 12.3% of total clients. Investment advisers manage $10.5 trillion on behalf of individuals.