Number of RIAs Dwindles as AUM Hits All-Time High

In 2011, 81.2% of advisors reported managing less than $1 billion AUM, and 41.3% reported managing less than $100 million AUM. Almost half of all advisors (49.8%) reported fewer than five full and part-time, nonclerical employees. More than two-thirds of all advisors (68.8%) employed fewer than 10 full and part-time, nonclerical staff, and more than nine in 10 (90.6%) employed fewer than 50.

The number of investment advisors that specialize in hedge funds has declined in recent years, the report states. In 2011, 1,200 investment advisors (10.4%) reported that more than 75% of their clients are hedge funds or other pooled investment vehicles, compared with 1,661 (16.1%) in 2006.

With the registration of private fund advisors required by the Dodd-Frank Act, the number of hedge fund advisors will increase. The report notes that the SEC estimates that an additional 700 private fund advisors will register with the commission under the Investment Advisers Act when the requirements are implemented in 2012.

“There will be dramatic shifts in the profile of the investment advisory profession when certain provisions of the Dodd-Frank Act are implemented next year,” said David Tittsworth, executive director of IAA, in a statement.

“It is estimated that about 3,200 smaller investment advisers will switch from SEC to state registration. With the addition of about 700 private fund advisers, we expect that the universe of SEC-registered advisers will shrink to about 9,000, representing a 17% decrease.”