SEC-registered advisers continue riding the fee-based wave

Report provides a glimpse of the RIA universe under the SEC's new disclosure rules

Sep 6, 2018 @ 4:00 pm

By Jeff Benjamin

Wealthy clients may represent the crown jewel for financial advisers, but regular earners still make up the overwhelming majority of clients being served across the financial planning industry.

According to the 2018 Evolution Revolution report, of the more than 32 million discretionary accounts managed by advisers registered with the Securities and Exchange Commission, more than 25 million, or almost 82% of all clients, are counted as non-high-net-worth.

The annual report, produced by the Investment Adviser Association and National Regulatory Services, dissects the public filings of 12,578 SEC-registered advisers and shows a trend toward steady asset growth, a continued preference for fee-based pricing and market share dominance by a small number of multi-billion-dollar firms.

The data, which do not separate individual financial planning firms from a large asset manager like Fidelity Investments, show a continued pattern of growth in industrywide assets under management outpacing both the growth in the overall U.S. economy and gains in the S&P 500 Index.

The report, published Thursday, shows total registered assets under management of $82.5 trillion, up 16.7% from $70.7 trillion a year ago.

While the number of SEC-registered RIAs has risen 3.3% from a year ago, the industry employs more than 805,000 non-clerical workers, an increase of 3.6% from a year ago.

John Gebauer, president of NRS, attributed the growth in part to an aging population and the decline of defined benefit pension plans.

"This report shows that advisers are able to deliver the fiduciary-based services requested by their clients to secure their finances today and in the future," he said.

Fees based on client assets under management continue to dominate financial planning, showing up as fee structures at 95.3% of SEC-registered advisers, up slightly from 95.2% in each of the past two years.

Other popular fee models included fixed fees (used by 43% of advisers), performance-based fees (37.4%) and hourly fees (29% of advisers).

Meanwhile, commission-based fees continued a steady decline to 3.6% from 4.1% of advisers last year and 4.5% two years ago.

The 18th annual report was the first published since the SEC enhanced its disclosure rules for public filings, a change designed to better identify and monitor risk at individual advisers for both policy and inspection purposes.

The new disclosure requires advisers to list separately managed account clients, meaning clients allocated to any non-pooled investments.

The report showed that 8,696 advisers, or 69% of all SEC-registered advisers, have some assets under management attributable to non-pooled, or separately managed, accounts. The report includes an extensive list of non-pooled asset types, which include both traded and nontraded securities, various types of bonds, derivatives and cash.

The enhanced disclosures also offer a look at how advisers are using social media. LinkedIn is most popular, used by 33% of advisers, followed by Facebook at 16.5% and Twitter at 15.5%.

The number of investment advisers with at least one website increased to 11,070 from 10,524 a year ago.

While 5,718 advisers reported having just one website, 5,352 reported additional social media platforms or multiple websites.

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