Assets at RIA firms hit $42.3 trillion

Growth reflects consumer preference for 'objective' planning

Sep 22, 2008 @ 12:01 am

By Sara Hansard

At a time when major investment banks are failing, the independent-advisory business is flourishing, according to a recent research report.

The "rising consumer demand for objective independent advice" caused the growth, said Dan Inveen, senior research manager at Moss Adams LLP of Seattle. For instance, independent-advisory firms have assets under management of $42.3 trillion, a number that spiraled 12% last year, according to the "Evolution Revolution," a 2008 report from the Investment Adviser Association of Washington and National Regulatory Services of Lakeville, Conn.

The asset figure is more than double the $20 trillion that was under management in 2002, and it is "three times larger than the [$13.8 trillion gross domestic product] of the U.S. last year," said David Tittsworth, executive director and executive vice president of the IAA, which produced the report along with NRS.

He cautioned that the number could be overstated because some assets might be included twice.

The research reviewed the ADV disclosure forms that registered advisory firms file with the Securities and Exchange Commission.

Moreover, 11,030 advisory firms registered with the SEC, a 6% increase compared with the previous report.

Despite brisk asset growth, the industry comprised primarily small businesses, 90% of which employed fewer than 50 people. Nearly half the firms employed fewer than five people.

However, almost half the assets were concentrated in a few companies. In fact, 82 firms managed at least $100 billion and more than $20 trillion in assets in aggregate.

The survey results are "further evidence of the continued transition toward the independent channel," Mr. Inveen said.

The IAA-NRS study results "are consistent with what we're seeing in our study results. It further supports that on the independent side, you are seeing healthy growth," he said.

Moss Adams found that among the 743 firms it studied, median advisory firm assets had climbed 18% at yearend 2007 to $110 million per firm, compared with a year earlier, Mr. Inveen said.

"Business continues to expand despite a slowing capital market," he said. Client growth increased 9% to a median of 160 clients at the end of last year.


A catalyst for the growth among independents is a negative perception of the wirehouses by clients as well as all the various challenges they have had, Mr. Inveen said. Many clients prefer wealth management services to product-oriented solutions

In addition to the growth figures for advisory firms, the IAA-NRS report determined that despite a wave of de-registrations after the U.S. Court of Appeals for the District of Columbia Circuit overruled an SEC hedge fund rule that required registration in 2006, a significant number of hedge funds have remained registered.

In 2008 thus far, 1,868 advisory firms that manage hedge funds have registered with the SEC.

"These hedge fund advisers are dealing with an institutional clientele that wants to do business with a registered regulated entity," Mr. Tittsworth said.

Fully 56% of advisers did business with pensions, corporations and charities.

Seventy-two percent of firms served high-net-worth investors who had at least $1 million in investible assets.

By contrast, 63% of firms also had clients who weren't high-net-worth. Just 15% of the firms advised investment companies.

Ninety-six percent of the advisory firms charged asset-based fees, about the same number as the previous two years, the IAA-NRS study found.

E-mail Sara Hansard at


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 30


Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video


TD's Kate Healy: How to attract more women to the industry

There's a need for more advisers in the industry, especially women advisers. Kate Healy of TD Ameritrade offers some insight on how to attract new talent to the space.

Video Spotlight

The Search for Income

Sponsored by PGIM Investments

Recommended Video

Path to growth

Latest news & opinion

Finra ranking brokers in effort to crack down on industry's bad apples

All 634.403 reps have been ranked based on factors such as prior regulatory disclosures, disciplinary actions and employment history.

How to save retirement planning from tax reform

Losing big deductions, even in lieu of a larger standard deduction, may cause taxes to rise in retirement.

Advice firms in a tricky financial position

As revenue growth dips and salaries rise, nearly 90% of firms are at or near capacity.

In a turnaround, Wells Fargo Advisors sees slight bump in headcount

Racked by a scandal in its retail banking unit, Wells still managed to add 37 new advisers in the third quarter, a small number but an improvement nonetheless.

Social Security benefits to increase by 2% in 2018

Largest cost-of-living adjustment since 2012 may be offset for some by higher Medicare premiums.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print