April 29, 2013

RIAs to Hold 25% of All Client Assets in 2014: Cerulli

Plus, the number of RIAs is fast approaching 30,000, the research firm finds

Cerulli Associates said early Monday that client assets custodied witth RIAs should make up about one-quarter of industry assets by next year. “The RIA channel’s growth has outpaced the industry and is drawing increased interest by asset managers,” said Tyler Cloherty, associate director at Cerulli Associates, in a statement. “There are a number of attractive distribution partners emerging.”

RIAs and dually registered advisors had about 18.6% of the advisor market share in 2010, the research group says. But that share should hit 24.7% by late 2014.

The growth of the RIA and dually registered channels is likely to continue to accelerate due to advisor movement and client choice,” Cloherty said. “Asset managers are expanding resources dedicated to the channel and anticipate future growth.”

In 2010, there was about $1.2 trillion in RIA assets for client accounts managed by roughly 27,930 RIAs. In 2011, that figure rose to about $1.4 trillion and 28,715, respectively.

RIA-channel growth is outpacing the broader industry, the recent Cerulli study found, and is drawing the interest of asset management distributors. This growth is being spurred by strong advisor recruitment, breakaway advisors leaving wirehouse and other traditional firms to create their own independent firms, and a growing client preference for RIAs.

Other key research findings are:

  • The appeal of the RIA channel has drawn more than 1,500 advisors from across the industry, managing on average $48 million per advisor.
  • The success of the dually registered channel has been a highlight of the past year, as the channel compiled the largest growth rate in both assets and advisors.
  • In Cerulli surveys, only 17% of dually registered advisors indicated a willingness to drop their broker/dealer affiliation.
  • For advisors moving into the RIA channel, breaking away from a larger firm may result in decreased wholesaler coverage. No longer included in a large office with multiple producers, the RIA firm must justify coverage upon its own assets.
  • The RIA channel cannot forever rely on advisor transition to generate growth. It must prove its sustainability through the hiring of new advisors to the industry.
  • At $1.5 million in client assets, the majority of RIAs charge less than 100 basis points (bps) on client assets, but a few are able to maintain pricing power despite increasing assets.
  • Advisors whose fee consciousness extends into their own revenue should be additionally cautious regarding manager fees.

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