Advancing Advisories

In the early 1990s, if you wanted to provide fee-based financial advice, going it alone as a registered investment adviser was about the only way. A small, but steady stream of wirehouse refugees began to set up RIA firms.Now the RIA stream has all but dried up."Many brokers who wanted to transition to RIA already have," says Dennis Gallant, a consultant with Cerulli Associates in Boston. "The market

In the early 1990s, if you wanted to provide fee-based financial advice, going it alone as a registered investment adviser was about the only way. A small, but steady stream of wirehouse refugees began to set up RIA firms.

Now the RIA stream has all but dried up.

"Many brokers who wanted to transition to RIA already have," says Dennis Gallant, a consultant with Cerulli Associates in Boston. "The market has plateaued. National brokerage firms are opening up fee-based products and access to outside products."

Rick Cortese of National Regulatory Services says he's seen "consistent growth" in RIA registrations handled by Lakeville, Conn.-based NRS in the past three years. But brokers aren't making the move more than any other type of financial services professional, he notes.

Fidelity Investments' Institutional Brokerage Group is having the same experience, says Jay Lanigan, executive vice president for the RIA channel. Independent broker/dealers have done a good job of providing fee-based advisory services, he says. "If there was a secret to the success of independent RIAs, it's no secret now. Brokers don't need to depend on the infrastructure of a large firm to do advisory business. It's more a personal decision now to go RIA."

About 8,000 advisers are registered with the SEC. These advisers account for 95 percent of all RIA portfolio assets, the SEC reports. Another 12,000 advisers--only those who manage less than 25 million dollars--are registered with the states. The total number of adviser registrations hasn't changed much since the mid-1990s, the SEC says.

Yet RIA assets are expanding. Cerulli reports an annual asset growth rate of 20 percent to 30 percent since 1996 and estimates that retail RIAs managed 420 billion dollars in assets in 1999.

"For the first time, we're seeing some independent [retail] RIAs with assets in the billions," Gallant says. "There's a sliver of advisers growing very rapidly."

According to Cerulli consultant Ryan Tagal, growth is concentrated among advisers who have been on their own at least four to five years, who have a solid business plan and who are at 100 million dollars to 150 million dollars in assets.

Meet three advisers who transitioned from brokerage and now have growing RIAs.

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