Growth In RIA Industry Outpaces Wirehouse Growth As Advisor Population Shrinks And Consolidates

Tuesday, August 14, 2012 07:01
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Growth In RIA Industry Outpaces Wirehouse Growth As Advisor Population Shrinks And Consolidates

Tags: banks | profitability | registered investment advisors

Registered investment advisors as a segment of the advisory population are growing. Their numbers increased by 3% in 2011 to 28,714. Independent RIAs keep more of what they make. Meanwhile, the total number of advisors fell from 323,566 in 2010 to 316,109 in 2011, a Cerulli report says.

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Training programs have gone by the wayside over the years. Yet, the average age of industry advisors increased from 48.6 in 2010 to 49.6 in 2011. Only 22% of advisors were under the age of 40.
 
Clearly, the population of advisors is not keeping pace with the growth of the industry. With the amount of assets under management by advisors remaining at about the same level—around $11.6 trillion—since 2008, assets are being consolidated among the advisors that remain.
 
Large wirehouses have adopted new training programs and, as a result, have boosted their numbers by about 1%. Even with that, there is a decided shift to independents—independent RIAs grew in number by 3% last year.
 
But bigger is winning out to be better. Smaller independents are being pushed out. Those who have not developed their brand are having problems attracting the talent they need to survive. With demand for experienced advisors catapulting to new heights, firms like LPL are adding advisors by the hundreds.
 
They’re getting them from other independents and from wirehouse advisors who want an already paved path toward independence. As wirehouses and banks continue to lose market share and to focus on boosting their margins, larger independents are aligning themselves with bank broker-dealers to offer a more robust slate of services.
 
As consolidation in the independent RIA industry grows, it will be fascinating to see if they indeed form and are able to preserve over the long term a better model of service to clients while maintaining the higher margins their wirehouse counterparts crave.

 

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