A new research report published by Tiburon Strategic Advisors in December and released Friday examines the fee-based financial advisor (RIA) arena; it categorizes these advisors as the fastest-growing financial services market and distribution channel.
The report, which is aimed at financial institutions such as mutual fund companies and custodians, is the second draft of a report originally published in 2007. It augments earlier data with information on, among other things, fee-based financial advisors’ use of technology and the profiles of a number of custodians.
Providing a top-down view of the market, the report also, according to the executive summary, “goes to painstaking efforts to define this market, which is often improperly defined and measured by others.” It categorizes fee-based advisors who are dually registered and have a brokerage license at a broker/dealer as “hybrid advisors,” and examines them as well.
The report works with a parallel report, titled A Comprehensive Overview of the Product Usage, Business Models, & Best Practices of Fee-Based Financial Advisors, which gives a bottom-up analysis of the specific actions of fee-based financial advisors.
Chip Roame, managing principal at Tiburon, pointed out to AdvisorOne that key points of the report are these:
- More brokers will break away and become RIAs, more so than independent reps
- Larger RIAs will continue to outgrow the masses of RIAs, distancing themselves further
- Custodians will fight to serve the largest and most prestigious RIAs, with especially those breakaway brokers in play
- ETFs will grow in use by RIAs; separately managed accounts will not
- Technology solutions for RIAs will advance quickly.
Among the report’s findings are the growth of the fee-based financial advisor sector, with 18,159 now practicing, up almost 40% since 2005, and the comparable growth of fee-based advisors’ client base, also up nearly 40% and now numbering approximately 7 million.
While nearly 75% of fee-based advisors offer portfolio management and other services—two thirds offer financial planning services—almost all of them consider themselves portfolio managers.
In addition, fee-based advisors have $1.1 trillion to $2 trillion in assets under management, depending on which segments are included; the report theorizes that $2 trillion is the more useful estimate.