The number of investment advisors reached an all-time high in 2023, as did total employment in the sector, and assets under management also increased substantially, according to an industry study released today.

The number of SEC-registered investment advisors reached a record high in 2023 of 15,396, according to the Investment Adviser Industry Snapshot, a joint report by the Investment Adviser Association (IAA) and consulting firm COMPLY. The number of advisors climbed for the twelfth year in a row to another record high during the year, according to the report.

Asset management clients also showed continued growth, with the industry working with 56.7 million clients in 2023, a 4.4% increase over last year. The number of total clients also increased by 3.5% over last year, the report said.

Over the past six years, more than 24 million more individuals have engaged an investment advisor for asset management—a rate of growth in the number of individual clients of 12.8% per year and in assets managed for those clients of 15.1% per year, the report said.

Assets under management also gained traction, rebounding 12.6% in 2023 and matching the record high of $128.4 trillion in AUM the industry set in 2021, the report said. That comes after advisors’ AUM fell in 2022 to $114.1 trillion as a result of stock market declines, according to the report.

Employment by the RIA industry also set a record. For the first time ever, non-clerical employment passed the one million mark, growing 3.6% and reaching a record high of 1,006,471 employees, the IAA said.

“The past year again illustrates the important role that the investment adviser industry plays, both by providing crucial advice to investors and as an essential contributor to the markets and the economy,” IAA President and CEO Karen Barr said in a statement.

Individual retail investors “increasingly recognize the value of fiduciary advice as they seek to save and invest for retirement, home ownership, education, and other goals,” Barr added.

The IAA, which lobbies in behalf of SEC-registered RIAs on Capitol Hill and at the SEC, said that regulatory change looms large for the industry.

“Rule proposals from the SEC have the potential to lead to significant industry change. For example, the safeguarding proposal would subject over 5,000 additional advisers—more than one-third of the industry—to custody requirements,” according to the report.

The trade group has highlighted with the SEC and lawmakers the fact that most advisory firms are small businesses.

The latest data illustrated this, showing 92.7% of advisors employed 100 or fewer employees, 69.3% managed less than $1 billion in assets, and 88.5% managed less than $5 billion.

Advisors focused on individual clients were likely to be small, with an average of just nine employees, two offices and $365 million in assets under management, the study found.

At the same time, advisors with less than $1 billion in assets accounted for almost all the new SEC registrations, with new registrants accounting for 10.0% of firms in this size range, according to the report.

The IAA was one of the groups pushing for the introduction of the Small Entity Update Act in the Senate in May, which is designed to protect smaller advisory firms from excessive or disruptive regulation from the SEC. The bill, which passed the House with strong bipartisan support last year, was introduced in the Senate this year by Sen. Katie Britt of Missouri.

The bill would require the SEC to consider the impact of its regulations on smaller advisors advisors and expand the number of firms it defines as small for purposes. Currently, only firms with less than $100 million are defined as small by the regulator, which the IAA and some lawmakers have deemed as too low.

IAA General Counsel Gail Bernstein said the SEC’s outdated “smaller advisor” definition has real-world consequences for firms. For instance, last year’s cybersecurity rule required all firms to submit reports to the SEC within 48 hours of a cyber “incident,” which was particularly burdensome for smaller shops, she said.