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Regulation and Compliance > Federal Regulation > SEC

Number of RIAs Drops as AUM Spikes: IAA, NRS

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While the total number of advisors registered with the Securities and Exchange Commission (SEC) dropped to 10,511 in 2012 from 11,539 last year, the total regulatory assets under management (RAUM) reported by all advisors jumped significantly—to $49.4 trillion in July from the $43.8 trillion AUM reported in 2011, according to a just-released report by the Investment Adviser Association and National Regulatory Services.

In their 12th annual report, Evolution/Revolution—an in-depth study that analyzes annual updates filed by SEC-registered advisors and based on information on file with the SEC as of July 16—both groups note the drop in the number of advisors is attributed to the “switching” of about 2,400 advisors with $25 million to $100 million in AUM in July from federal to state registration, as mandated by Dodd-Frank.

But the Dodd-Frank Act also required the registration of certain “private fund advisors” under the Investment Advisers Act, which has resulted in the addition of more than 1,500 newly registered investment advisory firms with the SEC.

David TittsworthDavid Tittsworth (left), executive director of the IAA, noted in a release announcing the survey results that the Dodd-Frank Act “has had a profound effect on the composition of the investment advisory profession.” The law, he said, “has shifted regulatory responsibility for hundreds of smaller firms to the states, while requiring larger private fund advisers to register with the SEC. These seismic shifts have resulted in a net decrease in the number of SEC-registered investment advisory firms. However, many of the core characteristics of the advisory profession remain fairly constant.”

For example, Tittsworth noted that a “relatively small” number of large investment advisory firms manage a high percentage of total RAUM. The 90 largest advisors—those that manage $100 billion RAUM or more—reported that they manage almost half (48.9%) of total RAUM. 

Similarly, the 664 advisors with $10 billion RAUM or more reported that they manage 82.7% of all assets, while most SEC-registered advisors are small businesses. “In 2012, 74.0% of all advisers reported managing less than $1 billion RAUM,” Tittsworth says. “Almost 60% of all advisors reported 10 or fewer full- and part-time, nonclerical employees and 88.7% reported 50 or fewer. It is clear that the U.S. investment advisory profession is an engine of small-business creation and growth.”

John Gebauer, managing director of NRS, added in the same release that the SEC-registered firms employ more than 759,000 professionals and serve more than 23 million individual and institutional clients.

He also noted that the IAA/NRS report “highlights the fact that the SEC is collecting more data about private fund advisers than ever before,” as private funds “have become a mainstream component of the investment advisory profession.” More than one-third of all SEC-registered advisers (37.9%) reported that they manage at least one private fund, and a total of 26,202 private funds have been reported by all SEC-registered advisors with collective RAUM of $8.1 trillion.

Approximately 2,333 advisory firms reported that more than 75% of their RAUM are from assets of private funds, Gebaur noted saying “1,346 of these ‘specialist’ private fund firms are newly registered as investment advisors with the SEC this year.”

Gebaur also noted the SEC’s intention to implement new examinations tailored to these types of firms, and that the SEC is in the process of collecting much more extensive information via Form PF.


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