Retiring boomers lead to increase in number of RIA firms, clients and AUM

Annual IAA and NRS study finds a 4.3% increase in the number of adviser jobs

Aug 3, 2015 @ 1:17 pm

By Alessandra Malito

Who says financial advisers are going the way of the dodo bird? It turns out that the need for advice is stronger than ever, thanks to the flood of baby boomers at or near retirement.

The 15th annual Evolution Revolution study by the Investment Adviser Association and National Regulatory Services, which analyzes Securities and Exchange Commission-registered investment advisers, found that the financial advisory industry is growing across the board in terms of the number of RIA firms, clients and assets under management.

In fact, the number of non-clerical jobs has increased by 31,000 in a year's time — an upswing of 4.3% year-over-year, with the industry employing more than 750,000 people, according to the study, which was based on data from Form ADV, Part 1 filed by all SEC-registered investment advisers as of April 8.

"One of the things that [the numbers] tell me is that there is an increasing need for this particular business," said John Gebauer, the president of NRS. "There is a great demand for financial advice and financial planning."

Over the last year, the number of advisory firms risen the most in four years — 5.4% — to reach a total of 11,473 firms.

Advisers are also serving 2 million more clients now compared to 2014. That's a growth of 6.8% year-over-year to approach 30 million clients in total.

Regulatory assets under management, or RAUM, is now at $66.7 trillion in aggregate, an increase of 8.1% since last year.

Mr. Gebauer added that the growth also showcases the importance of financial adviser jobs in the economy.

"As it continues to grow, it will generate more jobs and create more economic success for many people," he said.

WEALTH TRANSFER DRIVING FACTOR

David Mullins, a financial adviser and founder of David Mullins Wealth Management in Richlands, Va., said he attributes the adviser industry's growth to baby boomers' need for financial advice as they approach or enter retirement.

"That has put a lot of money in motion," Mr. Mullins said about the great wealth transfer, when advisers are expected to see $30 trillion exchange hands over the next 30 years.

"I think it will continue for the foreseeable future," he said. "Retirees are looking for advice and it just presents an opportunity for the adviser industry."

The study shows an increase in small adviser businesses, even if only a small number of advisers are managing a high percentage of the industry's overall RAUM.

Although 128 firms manage $100 billion or more in assets that control about 54% of total RAUM, the remaining 46% is managed by 11,300 firms. Just over 57% of advisers reported having 10 or fewer non-clerical employees while more than 10,000 firms reported having 50 or fewer non-clerical employees.

There's still a lot of work to be done in the industry, though, Mr. Gebauer said — especially when it comes to adviser regulation. He doesn't expect to see much change in the next few years, either, especially as the SEC tries to keep up with adviser growth through examinations. The SEC currently examines 10% of the 11,500 advisers annually and has said it hopes to bring that number up to 14%.

Adviser growth may hinder that expectation.

"As the number of advisers continues [to grow], then that exam rate will struggle to keep up and reach those goals," Mr. Gebauer said. "We will continue to examine approximately at the 10% rate."

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