Despite a
recession and uneven economic recovery over the last year, the investment advice industry has grown — both in the number of practitioners and the amount of money they guide, according to a study released Wednesday.
As of April, there were 11,643 investment advisers registered with the Securities and Exchange Commission, according to an analysis of SEC data by the Investment Adviser Association and National Regulatory Services. That’s a 3.4% gain over last year.
Total assets under management over the same time period grew to $38.6 trillion, from $33.99 trillion, a 13.4% increase. Advisers reported that they serve approximately 30 million clients.
The advisory business is dominated by small firms, stated the report,
“2010 Evolution Revolution: A Profile of the Investment Adviser Profession.” Of the firms registered with the SEC, 82.8% reported managing less than $1 billion in assets, and 90.8% said they have 50 or fewer employees.
But relatively few big firms manage the lion’s share of assets in the industry. The study shows that 508 advisory shops, or 4.4% of those registered with the SEC, manage more than $10 billion in assets and account for 83.3%, or $32.1 trillion.
The report states that “mega-firms” — the 64 reporting more than $100 billion in assets — controlled $18.7 trillion in AUM, or 48.4%.
Many advisers (65.5 %) said that individuals make up half or more of their clientele. Among institutional clients, 56.4% of advisers work with profit-sharing plans, 49 % counsel corporations, and 41.6% assist charitable organizations.
Under the Dodd-Frank financial-regulatory-reform law, the SEC will transfer to state oversight of advisers whose assets under management total $25 million to $100 million. There are 4,228 advisers in that category, according to the study. Currently, the SEC regulates investment advisers with AUM greater than $25 million.
Another provision in the Dodd-Frank bill requires that private funds of $150 million or more register with the SEC. Giving the agency oversight of these pools of capital is designed to help the government monitor systemic risk. The number of
hedge fund advisers totaled 1,271, or 10.9% of all advisers, according to the report. That number is down from 1,661 in 2006.
“Overall, the investment advisory profession has shown its strength, health and vitality by recovering from a significant setback in the market drop of 2008-09,” David Tittsworth, the IAA’s executive director, said in a statement.
John Gebauer, managing director of NRS, noted that over the last 10 years, the profile of the average adviser has remained stable in terms of clients, services and compensation.
“There are, however, many more advisers serving more clients and managing more assets,” Mr. Gebauer said in a statement. “The near doubling of assets managed by SEC advisers is pretty amazing, considering that the Dow Jones Industrial Average has remained relatively flat in the same time period.”
