Northeast RIAs see growth bounce back in 2021

In the second year of the Covid-19 pandemic, large registered investment advisers based in the Northeast region saw a return of business and growth, doing so well they even outpaced the average increase in assets of recent years.

The 2021 growth for RIAs in New York, Boston and Philadelphia came after the first year of the pandemic, 2020, in which large RIAs in the Northeast struggled to keep up with their competitors in other parts of the country, particularly the South.

The first year of business during the pandemic severely challenged the ability of large RIAs in the Northeast to woo wealthy clients over dinner and drinks, compete fully in the current rough and tumble mergers and acquisitions market and execute plans to increase staff. 

But 2021 was different and those regions saw a rebound, according to InvestmentNews data. Large RIAs in the Northeast had $815.2 billion in assets this year compared to $687.1 billion in 2020, year-over-year asset growth of 18.6%.

The improvement this year in the Northeast came after a particularly trying 2020, when businesses and work-life were dramatically altered by the pandemic. Last year, large Northeastern RIAs actually saw average firm size decline by less than 1%. Average firm growth size this year rebounded to 8.8%.

“This speaks to the resiliency of small businesses, which are often led by so called Alpha dogs,” said Danny Sarch, an industry recruiter. “It’s made these small-business RIAs formalize regular meetings, when it used to be the boss saying, hey, have you got a minute.”

“And getting rid of home schooling this year was an enormous reduction of a burden for executives and employees,” he said. “With kids back at school, you can actually do work from home.”

In the Midwest this year, large RIAs notched $472.5 billion in assets compared to $375.2 billion a year earlier, or annual growth of 25.9%.

Both those one year growth rates in the Northeast and Midwest outpaced average annual growth going back to 2018, according to InvestmentNews data.

Not so in the South, which benefited in 2020 from low state taxes and warm weather, which made common practices like meeting clients outdoors for lunch easier. In 2021, large RIAs in the South reported total assets of $453.2 billion compared $410.3 billion the year earlier, for one-year growth of 10.4%, lagging its four-year average growth rate.

The InvestmentNews annual review of RIAs by region includes firms with $100 million or more in assets, according to their most recent Form ADV on file with the Securities and Exchange Commission, and splits them into four regions: the Northeast along with the West, Midwest and South. 

And 2021 has been another record year for the broad stock market, helping RIA firms’ asset growth and profitability, with the S&P 500 up 24.4% year-to-date through trading early Monday afternoon.

Meanwhile, the RIAs in the West region continued to see robust growth in the face of Covid-19 difficulties. They reported close to $753 billion in assets this year compared to almost $617 billion in 2020 for growth of 22% and well outpacing the region’s four-year average.

“Everyone has adjusted to the new normal,” Sarch said.

Northeast

Midwest

South

Related Topics: COVID-19, Registered Investment Advisers