Number of investment advisors hits record high

The number of investment advisors reached an all-time high in 2022, as did total employment in the sector, even as assets under management declined, according to an industry study released Thursday.

The Investment Adviser Association reported that there were 15,114 investment advisors registered with the Securities and Exchange Commission in 2022, an increase of 2.2% from 2021, when there were 14,806 advisors. The number of advisors was 12,993 in 2018. Advisors employed 971,487 staff last year, up from 928,505 in 2021 and 835,124 in 2018.

Advisors’ assets under management fell in 2022 to $114.1 trillion — compared to $128.4 trillion in 2021 — as a result of market declines. But the sector’s total AUM was still considerably more than the $83.7 trillion in 2018.

Advisors worked with 61.9 million clients last year, down from 64.7 million in 2022 but up from 43.6 million in 2018. Last year, 62.8% of advisors provided asset management for clients.

The statistics are contained in the IAA’s Investment Adviser Industry Snapshot 2023. The trade association representing SEC-registered advisors releases the study annually. It's based on information contained in investment advisors’ Form ADV Part IA registration documents filed with the SEC.

The report was previously published as Evolution Revolution through 2020. The IAA conducted the study along with National Regulatory Services, a company affiliated with the consulting firm Comply.

In its advocacy for investment advisors on Capitol Hill and at the SEC, the IAA often makes the point that most advisory firms are small businesses. The Snapshot bears out that assertion, showing that 91.7% of advisory firms employ 100 or fewer staff. The report also shows that 70.2% of advisors manage less than $1 billion in assets and 88.5% manage less than $5 billion.

The IAA said an increasing number of investors have turned to advisors over the last five years because they trust advisors, who must adhere to fiduciary duty when providing recommendations.

“Investors are increasingly engaging investment advisers, which continuously provide investment management advice as fiduciaries, putting their clients’ interests ahead of their own,” IAA CEO Karen Barr said in a statement. “Over the past five years, over 22 million more individuals have engaged an investment adviser for asset management — a rate of growth in both the number of individual clients and assets of roughly 12% per year.”

A new trend in the sector is related to the SEC’s marketing rule, which went into force last November. The regulation overhauls how advisors can promote their practices. It allows them for the first time to use client testimonials in advertising, among other significant reforms.

The IAA study said 40% of advisors touted their performance results in advertising.

“Advisers provided insights on their advertising practices in 8 new questions added to Form ADV as part of the SEC’s Marketing Rule,” the report states. “Including performance information was the most common practice.”

The IAA is one of many trade associations that have raised concerns about the scope and pace of SEC Chair Gary Gensler’s agenda. The report highlighted several SEC proposals that could make a significant impact on the sector.

“Perhaps most noteworthy is the safeguarding proposal, which would subject over 5,000 additional advisers — more than one-third of the industry — to custody requirements,” Barr and John Gebauer, chief regulatory officer at Comply, wrote in an introduction to the report.