Why Hawaii may be a blue ocean for advisor AUM growth

SEC-registered dvisors based in Hawaii may face less competition for high-net-worth clients than anywhere else in the country, according to new research from SmartAsset.

SmartAsset analyzed how much potential assets under management (AUM) are available per RIA by state, by dividing the total household net worth – excluding home equity – by the number of active investment advisors registered with the Securities and Exchange Commission in each state. It covers 44 states where sufficient data was available.

Hawaii topped the list with more than $917 million in potential client assets per advisor – nearly triple that of any other state. Hawaiian households also appeared to be the most affluent, with the average household posting $260,100 in net worth. Massachusetts was a far second on that score, with $148,300 per household on average.

Maine ranked second in the asset opportunity rankings with approximately $341 million in potential AUM per advisor, followed by New Mexico at about $201 million. Mississippi, Washington, Montana, and Idaho were the only other states where potential AUM per advisor exceeded $100 million, according to the report by SmartAsset.

While several of these top-ranking states have relatively small populations, their rankings were driven largely by the limited number of active advisors working within them. Hawaii’s 140 advisors serve fewer than 500,000 households, for example.

Virginia, West Virginia, and Kentucky rounded out the top 10 states, each offering between $85 million and $90 million in potential AUM per advisor.

In contrast, states with larger financial advisor footprints were far lower on the list. Missouri had the lowest potential AUM per advisor in the analysis, with just over $2.1 million per advisor on average. That state is home to nearly 40,000 active investment advisors, significantly outpacing its household net worth base.

New York, despite being a hub for financial services and home to the world's wealthiest city, came in second to last. With 146,870 active advisors – the most of any state – the average AUM potential per advisor was just under $2.8 million. Neighboring states like Connecticut and New Jersey fared slightly better, ranking 39th and 31st, respectively.

Overall, many of the most populous states, including California, Florida, Texas, and Illinois, landed in the bottom half of the rankings. In those states, high concentrations of RIAs and large numbers of households contribute to increased competition for assets, even as total household net worth may be higher in aggregate.

California, for instance, has more than 34,000 active advisors serving nearly 13.7 million households. With an average household net worth of $85,760, the state still ranked only 28th, with $34 million in potential AUM per advisor.