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RIA Industry Broke Records, Again, in 2021: New Data

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What You Need to Know

  • AUM grew 16.7% to a record high of $128.4 trillion in 2021, and assets have increased in 18 of the past 21 years.
  • Some 92.5% of industry assets were managed by firms with AUM over $5 billion last year.
  • The strongest growth in the number of advisor firms in 2021 was in the South, especially Florida.

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 2021, according to a report released Thursday by the Investment Adviser Association and National Regulatory Services.

In 2021, the number of SEC-registered investment advisory firms increased 6.7% from 2020 to 14,806 firms, an increase of 926 firms, according to the report. The number of SEC-registered firms has increased in 19 of the last 21 years, the report said.

Registrations declined only in 2010 and 2011, when the minimum size threshold for SEC registration grew to $100 million in AUM from $25 million, the report noted.

The vast majority of advisors (88.1%) worked in smaller firms in 2021, with 50 employees or less, according to the report.

Meanwhile, assets under management by SEC-registered firms grew 16.7% to a record high of $128.4 trillion in 2021. Industry assets have increased in 18 of the past 21 years, declining only in 2002 and 2008 because of market conditions, according to the report.

As in prior years, almost all assets were managed on a discretionary basis (91.5% in 2021), the report said.

The number of clients served by SEC-registered advisors grew 6.4%, reaching a record high of 64.7 million clients, including 53 million asset management clients. Meanwhile, 59.8% of advisers provided asset management services for individuals, the report said.

While 87.9% of the SEC-registered advisors had under $5 billion in AUM, 92.5% of industry assets were managed by firms with AUM over $5 billion, according to the report.

Asset growth has been strongest for advisors with over $100 billion in AUM, the report noted.

“The industry is dynamic, with significant” advisor turnover, particularly among advisors with under $1 billion in assets, the report said. “Mergers and other types of reorganizations have been a significant contributor to this turnover,” it pointed out.

In each of the past eight years, the number of SEC-registered advisors has increased, while the number of brokerage firms has declined, the report noted.

“The results of the 2022 Snapshot confirm investors recognize the value of fiduciary advice in helping them meet their financial goals, whether planning for retirement, saving for homeownership or funding an education,” according to Karen Barr, IAA CEO and president.

“With of the vast majority of firms employing 50 or fewer people, it’s clear small businesses serving individual investors are the backbone of the investment adviser community,” she said in a statement.

 Other highlights of the report included:

  • The nearly 15,000 SEC-registered advisors employed over 928,000 non-clerical employees.
  • The strongest growth in 2021 was in the southern U.S. Over the last two years, gains in advisors based in that region “outpaced gains in other parts of the country,” the report said. Growth in Florida was strongest nationwide, while New York numbers have fallen.
  • Asset growth was highest for the largest advisors. Advisors with over $100 billion in assets saw compound annual growth in assets of 14.9% over the past four years, far ahead of advisors with $100 million to $5 billion in AUM, who saw compound growth of about 6% over the same period.
  • The number of private funds grew by 15.2% in 2021. Growth was in the double digits for all types of private funds, except hedge funds and liquidity funds.

“This year’s report underscores the diverse nature of the industry and its tremendous growth, most notably in terms of the number of individuals and the number of private funds,” according to John Gebauer, NRS president.

“These trends are clearly having an impact on the SEC’s focus areas for examinations and rulemaking, as evidenced by the proposals made earlier this year which aim to increase protections for private fund investors,” he said in a statement.

(Image: Adobe)