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On a growth path: RIA and dually registered advisor channels

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The total number of financial advisors declined for the 5th consecutive year, dipping 1.9 percent in 2014, according to new research.

Cerulli Associates discloses this finding in a new report, “Advisor Metrics 2014: Capitalizing on Transitions and Consolidation.” This 11th edition of the annual report examines advisor attributes (such as career path, licenses and business model), their books of business and practice management issues. The report also addresses the dynamics of client relationships and advisor portfolio construction processes.

““The registered investment advisor (RIA) and dually registered channels are the only segments that have increased headcount over this time,” says Kenton Shirk, associate director of Cerulli Associates. “We project the headcount growth in the RIA and dually registered channels will continue to over the next 5 years,” he adds.

Among the report’s highlights:

  • The market share of the registered investment advisor (RIA) and dually registered channels will increase to 28 percent in 2018 from 20 percent of total assets in 2013.

  • Despite historic and projected market share losses, wirehouses remain the dominant traditional advisory distribution channel.

  • Approximately one-third (36 percent) of $500 million plus practices are RIAs and dually registered advisors and 32 percent are wirehouses.

  • Though many advisors view themselves as portfolio managers, they should embrace a relationship management model that would afford them more time to cultivate relationships, leading to increased retention and business development efforts.

  • Driven by the ability of comprehensive advice to increase the strength of client relationships, advisors expect to offer comprehensive written financial plans to nearly half their clients by 2017.

  • An expanding investment universe and increased complexity have magnified the importance of home-office research, with broker-dealer-supplied models serving as the most popular starting point in advisors’ portfolio construction.

  • In the short term, not many advisors are shopping their practices. Those who are appear to be overly optimistic regarding the prices they may command, requiring buyers to strategically position themselves and their practices to attract sellers.