Business is good for the investment advisor industry, which now manages $82.5 trillion, up 16.7 percent from $70.7 trillion last year, according to a new industry report.
In fact, business is booming across the board for advisors, according to “2018 Revolution Report," produced jointly by the Investment Advisor Association (IAA) and National Regulatory Services (NRS).
The study offers a comprehensive profile of SEC-registered investment advisors, containing data on 12,578 firms managing $82.5 trillion for more than 34 million clients.
“This year’s data demonstrates dramatically that the investment advisor profession remains dynamic, robust and critically important to investors and the capital markets,” IAA President and CEO Karen Barr said. “And investment advisors remain a powerful provider of high-quality jobs to the economy, including in small businesses.”
Twenty percent more clients are receiving investment advice from the advisory industry compared to five years ago and there are now 13.9 percent more advisors to meet the needs of a wide variety of investors—from small retail individuals to large institutions, the study found.
SEC-registered investment advisors now serve more than 34 million clients, with individuals comprising the largest category of advisory clients, according to the study. Individual clients (94.1 percent)—in particular, non-high-net-worth individuals (81.8 percent of total clients)—comprise the vast majority of clients. High-net-worth individuals make up 12.3 percent of total clients. Investment advisors manage $9.9 trillion on behalf of individuals, according to the study.
“Fueled by baby boomer demographics and the decline of defined benefit retirement plans, the demand for trusted and personal investment advice continues to grow,” NRS President John Gebauer said. “This report shows that advisors are able to deliver the fiduciary-based services requested by their clients to secure their finances today and in the future.”
Several segments of the industry are growing faster than others, the study found. The largest investment advisors, those that manage more than $100 billion in regulatory assets under management, grew at a faster pace than smaller advisors in terms of both number and AUM.
To meet the demand for advice, the number of SEC-registered investment advisors grew by 406 advisors, or 3.3 percent, to 12,578. Advisor staff also grew. Today, advisors employ 805,623 skilled, non-clerical workers, with more than half—415,000—performing investment advisory functions.
The vast majority of SEC-registered investment advisors are small businesses, the study found. In 2018, 56.8 percent (7,147) of advisory firms reported that they employ 10 or fewer non-clerical employees, and 87.5 percent (11,011) reported employing 50 or fewer individuals. At the opposite end of the spectrum, the largest 108 firms employ 52.5 percent of all non-clerical employees in the industry.