Executives and stakeholders in the registered investment advisory space often tout the channel’s growth; actual data, reported Thursday by the Investment Adviser Association and NRS, confirms it. The number of Securities and Exchange Commission-registered investment advisors is at a record high of 12,993, up 3.3% from 2018, with these firms serving more than 43 million clients and overseeing $83.7 trillion in assets.
And many of these firms are staffing up, with a total of 835,124 nonclerical employees, up nearly 4% from a year ago and 16% over the past five years. About half of these employees provide investment advisory services, up nearly 5% over 2018.
“Our profession is experiencing continued growth as increasing numbers of investors recognize the value of fiduciary advisors,” IAA President and CEO Karen Barr said in a statement. “This year’s report demonstrates that advisors 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.”
AUM across the channel grew $1.2 trillion, or 1.4% year over year, but growth of assets is slowing compared with past years, likely a function of stock market performance. For instance, in 2015, assets grew 8%, and in 2018 it were up nearly 17% from 2017. Since 2001, total industry assets have grown at a compound annual growth rate of 8.2%, the report states.
The majority of AUM is concentrated among a small group of large advisors. While they account for only 1.1% of SEC-registered advisors, the 148 RIA firms managing over $100 billion account for nearly 60% of industry assets. About seven in 10 RIAs manage less than $1 billion in assets, and they account for just 3.1% of all AUM.
The gap between the number of RIA firms and the number of Financial Industry Regulatory Authority (FINRA) member broker/dealers continues to widen. While RIA registration was up 3% from a year ago, FINRA membership declined 3% to 3,607.
“It remains to be seen whether the declining broker/dealer trend will be affected by Regulation Best Interest, or Reg BI, the SEC’s new rule that was intended in part to prevent further decline,” the IAA/NRS report said. “Reg BI may feed into or accelerate the secular trend of an increasing number of advisory firms, clients, and employees, or it may prompt more broker/dealers to become hybrid advisers in order to offer an advisory option.”