Well, that really hurt
This year, almost every single RIA on our Top 100 list suffered a significant drop in assets versus 2008, with an average drop of about 20 percent. Of course, that's to be expected given the violence of the selloff. But for some, these declines in assets are game changers.
“No one is immune from the decline in portfolio value and the devastation of the market,” says Philip Palaveev, president of Fusion Financial, an Elmsford, N.Y.-based network of advisors. For the past five years, RIAs have been the best asset gatherers in the industry, but that runaway asset growth has stalled. “This time the problems hurting the industry are not just hurting big brokerages or investment banks,” Palaveev says. “Registered investment advisors are feeling the heat just as much as anyone else.”
Some RIAs are responding by tweaking their business models. Sweetwater Investments, profiled on page 57, says it's looking for ways to cut costs for clients to make this downturn more bearable. And Sontag Advisory, on page 56, has dramatically reigned in risk. “There's been an unprecedented amount of disturbance over the last year that's required bold moves on our part. We don't mind adjusting,” says founder, Howard Sontag. Another RIA principal at a $1.5 billion RIA who preferred to remain unnamed says he too is changing tack. The advisor used to do all his client acquisition himself, but he recently lost a client with about $250 million in assets. Now he's considering getting some help winning new business.
“I'm not saying we're going to turn our whole belief system on its head. We'll continue to stand by our conservative philosophy. But we do have to adapt to everything today, and figure out how to keep our heads above water,” he says.
Some RIAs have decided they would be better off joining forces with their peers. In the first quarter of 2009, 18 deals between RIAs were done, with $29 billion in assets changing hands. By comparison, in the first quarter last year, RIAs did 10 deals representing $14 billion in acquired assets. The volume of deals is unlikely to slow: According to a Citigroup study on RIAs published last fall, about one-third of RIAs surveyed said they want to buy another RIA over the next 12 months.