What You Need to Know
- The markets have had huge gains, and RIAs' assets under management have grown.
- There's also been an increase in the number of clients gravitating toward fiduciary advice.
- The transition to federal regulation means added compliance duties.
The number of state-registered advisors moving to SEC registration is surging, according to compliance pros.
The Investment Adviser Association’s 2021 Investment Adviser Industry Snapshot found that the total number of firms registered with the Securities and Exchange Commission in 2021 hit a record high of 13,880 — an increase of 386 firms, or a 2.9% boost, from last year.
“Despite the financial challenges and the business and market disruptions caused by the COVID-19 pandemic, the investment advisor industry continued to experience record-breaking growth in 2020,” according to the report.
Individual investor demand for advice is also on the rise, the report found.
“While all client segments have grown over the past three years, growth in both the number and assets of individual clients has been exceptionally strong, with the number of individual investors growing by 38% over the past two years,” the report states.
What Your Peers Are Reading
Advisors must registered with the SEC when their assets under management hit $110 million.
- Rising markets
- Clients gravitating toward fiduciary advice
- Increase in clients that are reassessing their financial situation since the pandemic
- Advisors getting more clients
Rory O’Connor, director, Bates Compliance:
“The main reason for this trend is that the markets have had such huge gains and RIAs’ assets under management have grown as well. Once an RIA hits $100 million in assets under management the RIA is eligible for SEC registration. After the firm reaches $110 million or more in assets … it must register with the SEC,” O’Connor said.
“Just the change in the value of those [client] accounts has gone up so significantly that it’s pushed a lot of firms to the point where they will need to transition [to SEC registration] next year,” O’Connor said.