Number of RIAs Jumps Slightly Despite Registration Switch

“Our report underscores the fact that the Dodd-Frank Act has had a profound effect on the composition of the investment advisory profession,” said David Tittsworth, executive director of the IAA, in a statement. “The law has shifted regulatory responsibility for hundreds of smaller firms to the states, while requiring larger private fund advisors to register with the SEC. These dramatic shifts have yielded 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.”

Other key findings from the report, which are based on information on file with the SEC as of April 12, include:

• SEC-registered investment advisors in 2013 reported $54.8 trillion in aggregate regulatory assets under management (RAUM), a substantial increase of 10.9% from $49.4 trillion in 2012. This increase is particularly notable given that the number of SEC-registered investment advisers has not changed significantly. This increase in RAUM managed by advisors may be attributable to both rising markets and organic growth in the industry, evidenced by the increase in the number of clients served.
• More than one-third of all SEC-registered advisors (38.1%) reported that they manage at least one private fund. Private fund advisors reported a total of 26,752 private funds with collective RAUM of $8.5 trillion – up from $8.1 trillion in July 2012.
• Hedge funds comprise 40.8% of all reported private funds while private equity funds comprise approximately 32.5%.
• 4,530 SEC-registered investment advisors (43%) reported that they or a related person are deemed to have custody of client assets.
• Less than 1% of advisors (99) reported acting as a qualified custodian (that is, having actual physical custody) in connection with their advisory services.

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