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Investment Advisor Industry Grows for 9th Consecutive Year 

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What You Need to Know

  • AUM grew 13.8% to $110 trillion in 2020, and industry assets have increased in 18 of the past 20 years.
  • Last year, 92% of industry assets were managed by firms with more than $5 billion in AUM.
  • Asset-based fees have become more common in the past 20 years, and commissions less common.

The number of investment advisors registered with the Securities and Exchange Commission, the number of clients they served, the assets they managed and the number of people they employed all reached record highs in 2020, according to a report released Monday by the Investment Adviser Association and National Regulatory Services, part of LexisNexis Risk Solutions.  

In 2020, the number of SEC-registered investment advisory firms increased 2.9% year over year to 13,880 firms. 

Assets under management grew 13.8% to $110 trillion. Industry assets have increased in 18 of the past 20 years, declining only in 2002 and 2008 because of market conditions, according to the report.

The number of clients served increased 17.2%, reaching a record high of 60.8 million. These clients fell into two categories:

  • Asset management clients — 49.7 million, up 18%.
  • Non-asset management clients who received other types of advice — 11.1 million, up 13.3%.

The report noted that all client segments have grown in recent years, but growth in both the number and assets of individual clients has been exceptionally strong, with the number of individual investors increasing by 38% and assets by 44% over the past two years. 

“As the industry’s consistent growth demonstrates, investors recognize the value of fiduciary advice in helping them meet their financial objectives, whether planning for retirement, saving for homeownership or funding an education,” Karen Barr, IAA’s president and chief executive, said in a statement.

According to the report, 88.5% of RIAs had less than $5 billion in assets under management in 2020, with the majority having between $100 million and $1 billion. More than 80% are small businesses employing fewer than 50 people. 

Over the past three years, the number of advisors has increased in all size categories except those with less than $100 million in assets under management. 

Growth was strongest among firms with more than $100 billion under management. The number of these largest firms grew to 185 from 147. Over the past five years, their assets have increased by some 14% annually, far more than those of smaller firms. 

In 2020, 92% of industry assets were managed by firms with more than $5 billion in assets under management, with almost two-thirds managed by the 185 largest firms.

Nearly all RIAs offer clients a fee based on a client’s assets under management, generally in combination with other fee types, according to the report. While asset-based fees have become more common over the past 20 years, commissions have become less common. 

Advisors have also become significantly more likely to offer performance fees and fixed fees. 

In 2020, employment in the investment advisor industry reached a record high of 879,755 non-clerical staff, with employment growth strongest in firms with more than $100 billion in assets.

Growth in the number of investment advisors has been strongest in the South and the West, the report said. In the pandemic year, advisors were less likely to be located in traditional financial centers.

“Advisory services are increasingly viewed as an indispensable and ubiquitous necessity for financial well-being for ever-greater portions of the population, the demand for which has been less sensitive to economic cycles than many other services,” John Gebauer, president of National Regulatory Services, said in the statement. 

“If this pattern continues to hold, the industry will experience continued and robust growth, further demonstrating its crucial role in the lives of investors.”