Cerulli Associates is expecting registered investment advisers to continue growing their market share of managed assets in the United States.
The consulting and research firm released it's State of the RIA Marketplace 2012 study today and projected that the RIA channel will account for 24.7% of assets in the wealth management market by the end of 2014. The share of RIAs and dually registered advisers was 20.1% at the end of 2011, the last year for which Cerulli has complete data.
“The growth of the RIA and dually-registered channels is likely to continue to accelerate due to advisor movement and client choice,” said Tyler Cloherty, associate director at Cerulli.
The movement of advisers to the RIA channel has been well documented. But the study did offer up a notable surprise: RIAs are actually getting more of their growth from new and existing clients than they are from new advisers becoming RIAs. In 2011, $118 billion of the $232 billion increase in assets in the RIA industry resulted from new and existing clients contributing more money, while $90 billion resulted from advisers becoming RIAs. The markets accounted for $23 billion in growth. “The organic growth has been a bigger driver than adviser movement,” said Mr. Cloherty. “RIAs are getting a lot of new clients and a lot of new money from existing clients.”
Mr. Cloherty attributes much of the growth in the RIA channel to the desire of wealthy investors to diversify their relationships with financial advisers since the financial crisis. The average number of advisers for nearly 8000 households surveyed for the report rose from .7 to 1.2 advisers -- not including 401(k) providers, between 2008 and 2012. For households with more than $5 million in investable assets, the number of adviser relationships rose from 1.4 to 2.3.
Mr. Cloherty said the trauma of the financial crisis led to a lack of trust in investors' existing advisers, and that triggered a desire to have multiple advisers compete for the investor's assets. He thinks wirehouse advisers have been hurt the most from that trend and RIAs have been the biggest beneficiaries. He expects, however, that the trend may now be peaking and that investors will look to consolidate their business with fewer advisers over the next several years.
“As we get further away from the financial crisis, the memories are going to fade, and the annoyance of having multiple providers will become more significant,” predicted Mr. Cloherty.
And who between competing advisers is likely to win the business? “The initial separation of assets benefited indie brokers and RIAs," said Mr. Cloherty. "But it's too early to tell who benefits from the consolidation."