• Separately managed accounts are soaring. Nearly three-quarters of advisors have RAUM attributable to SMAs, and 9,878 advisors (73.2%) have RAUM attributable to SMA clients.
• Private equity funds are beating hedge funds in popularity, with 4,840 advisors reporting they advise 40,742 private funds with a total gross asset value of $19.1 trillion, up from 4,520 advisors and 37,873 private funds and an increase from $14.9 trillion gross asset value in 2019. While the percentage of hedge funds and private equity funds was exactly equal four years ago, private equity funds now make up over 41.2% of privately offered funds and hedge funds represent less than 28.3% in the private fund space.
• Digital advice platforms are expanding the market for advice. Two of the top five advisors as measured by number of non-high-net-worth individual clients served are digital advice platforms, representing 7.5 million clients, an increase of 2.7 million clients from the 2019 report. These clients tend to have lower—and in some cases zero—account balances.
Digital advice, “is driving the latest evolutions in operations and accessibility, which have led to the industry now serving over 42 million clients.” NRS President John Gebauer said.
This year’s report is based on data obtained before Covid-19 was declared a global pandemic in March.
“As a result of the dramatic shift in firms operating from many more physical locations and related changes in their operational structures, advisers will need to continue to devote more resources to technology and continued operational resilience measures,” the report said.
On the regulatory front, the SEC’s Standards of Conduct rulemaking package (Regulation Best Interest) became effective in June 2020 and is likely to continue to shape industry trends for years to come.
“While it remains to be seen how the SEC will implement and enforce Regulation Best Interest and whether the package will ameliorate investor confusion, this significant development may continue to accelerate the secular trend, as documented in this report over the years, of an increase in the number of advisory firms, clients, employees, and investment advisors,” the report said.