Six years ago, a leading consultant to the advisory business told me that every major metropolitan market in the nation was about to host at least one RIA firm with $1 billion in assets or more. At the time, this was about the same size as an average wirehouse branch office.

Taking a look at this year’s annual RIA survey, those numbers have climbed exponentially. Today, Cincinnati has five RIAs with over $900 million. The Atlanta area has six, while the greater Boston area has 11. As for the Beltway where the real money is, there are 12. Get the picture?

It would be a mistake to place too much emphasis on the spectacular asset growth at leading RIA firms after a five-year bull market. Furthermore, a professional service business that places clients’ interests first doesn’t want to use a McDonald’s-style slogan like “300 billion served.” But it would also be a mistake to underestimate the degree to which the RIA business model has resonated with upper-middle-class America.

Affluent Americans got burned twice by Wall Street in the last two decades and, as the saying goes, “Fool me once, shame on you. Fool me twice, shame on me.” The first incident came in the tech bubble and, truth be told, many investors in dot-com acted out of their own volition in the mania of the moment.

The second time was different. Middle-class folks and others were duped into buying homes, in many cases because they were sold mortgages with terms that proved too good to be true.

When the financial crisis arrived, there was no shortage of culprits, from politicians to bankers to greedy or ignorant home buyers. Then Wall Street got bailed out while most of the rest of America got screwed to an extent only those had lived through the Great Depression could recall. The repercussions of these events still poison our politics and national conversation.

Looking at how successful the RIA business has become, it might be natural to worry about the potential for hubris. Fortunately, most RIAs are still relatively small businesses competing for clients against other fiduciaries in a very crowded market. Principals at most RIAs are still able to recall struggling to build a firm in their early days.

These factors act as a protective cushion to prevent the arrogance that brought Wall Street down from spreading to this business, despite all its success. And that’s a good thing.

Evan Simonoff, Editor-in-Chief
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