State-registered investment advisers hold steady at more than 17,000

The number of state-registered investment advisers held steady at more than 17,000 for the fourth straight year in 2020.

There were 17,454 investment advisers registered at the state level last year, according to the annual report about adviser oversight by the North American Securities Administrators Association. That total is down slightly from 17,533 in 2019; 17,543 in 2018; and 17,688 in 2017.

The states with the most registered investment advisers for the fourth year in a row were California, Texas, Florida, New York and Illinois. Last year, the states that experienced the biggest increase in registered investment advisers were Florida, Ohio, Texas, Arizona and Nevada.

Investment advisers with less than $100 million in assets under management register with the states in which they operate. Advisers with more than $100 million register with the Securities and Exchange Commission. There are approximately 13,900 SEC-registered advisers.

The NASAA report said the vast majority of advisory firms that state regulators oversee are small businesses — with 81% having a staff of one or two people.

“State-registered advisers work in most every town in every state across the country, mostly in one- or two-person shops staffed with licensed professionals exclusively,” the NASAA report states.

The most popular compensation model for state-level advisers is charging clients based on their assets under management, a method 84% utilize. About half of them charge an hourly or fixed fee, 3% charge commissions and 1% charge a subscription fee.

The regulation of evolving fee approaches is a priority for NASAA’s Regulatory Policy and Review Project Group. The panel aims to create “a guidance document related to investment adviser alternative fee models,” the report states.

Last year, NASAA released a model rule for investment adviser policies and procedures and another one on continuing education for investment adviser representatives.  

“[U]nlike other financial service professions, IARs have not been subject to a continuing education requirement to maintain their licenses with state regulators,” the report states. “The model rule helps NASAA members close this gap by requiring IARs to take 12 hours of continuing education annually.”

The model rules must be adopted by individual states through regulation or legislation. No state has yet approved the CE or policies and procedures rules, but a few are considering them.

The membership of NASAA includes regulators from the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada and Mexico.