The number of federally registered investment advisors and the assets they manage continues to jump, with the number of SEC-registered advisors reaching 12,578, an increase of 406 advisors (or 3.3%) since last year, according to a the latest poll by Investment Adviser Association.
SEC-registered advisors’ AUM now stands at $82.5 trillion, a 16.7% increase from $70.7 trillion in 2017, the largest percentage increase since 2014, according to the “2018 Evolution Revolution” report, written by IAA and National Regulatory Services and provides a snapshot of the SEC-registered advisor universe.
“This year’s data demonstrates dramatically that the investment advisor profession remains dynamic, robust and critically important to investors and the capital markets,” said Karen Barr, IAA’s president and CEO, in releasing the report. “And investment advisors remain a powerful provider of high-quality jobs to the economy, including in small businesses.”
The report highlights the following characteristics for the “typical” SEC-registered investment adviser:
- Works with a team of nine employees;
- Serves individual clients, not institutions;
- Has $359 million in regulatory assets under management;
- Manages 124 client accounts;
- Has at least one pension/profit-sharing plan as a client;
- Exercises discretionary authority over most accounts;
- Does not have actual physical custody of client assets or securities; and
- Works via a U.S.-based limited liability company headquartered in California, Connecticut, Florida, Illinois, Massachusetts, New Jersey, New York, Ohio, Pennsylvania or Texas.
The RIA industry is made up of small businesses, with 56.8% (7,147) of advisory firms reporting in 2018 that they employ 10 or fewer non-clerical employees, and 87.5% (11,011) reporting employing 50 or fewer individuals.
Individual clients represent 94.1% of the client population, with non-high-net-worth individuals making up the majority of clients, at 81.8%.
The report found that investment advisors managing more than $100 billion in regulatory assets under management grew at a faster pace than smaller advisors in terms of both number of firms and AUM.
Asset-based fees continue to dominate, with 95.3% of RIAs indicating that they are compensated based on a percentage of their assets under management.
The number of firms charging commissions dropped to 3.6% of all advisors in 2018, down from 4.1% and 4.5% in 2017 and 2016, respectively — likely due to the demise of the Labor Department’s fiduciary rule, the report states.