The investment advisor industry continued to experience record growth through 2019, with both the number of registered advisors and assets under management soaring, according to the newly released 2020 Evolution Revolution Report.
The number of SEC-registered investment advisors hit an all-time high of 13,494 advisory firms, a net increase of 3.9% over the previous year with assets increasing 16.2% to $97.2 trillion. The growth came despite the fact that more than 87% of firms are small businesses, according to the annual report co-sponsored by the Investment Adviser Association and National Regulatory Services.
Entering its 20th year of publication, Evolution Revolution’s findings are based on data reported by advisory firms to the SEC.
“In every key metric—from industry size to assets under management to high quality jobs created—the investment adviser profession showed solid growth, underscoring our critical value to investors, to the economy and to our capital markets,” IAA president and CEO Karen Barr said. “Investors continue to recognize the value of fiduciary advice, turning to investment advisers to help them achieve their goals and navigate their financial futures.”
Key findings of the report include:
• SEC-registered investment advisors served more than 42 million clients, with Individuals comprising the largest category of advisory clients (95% of total clients). Non-high-net-worth individuals (83.3% of total clients and 87.7% of individual clients) comprise the vast majority of clients by a wide margin. High-net-worth individuals make up 11.7% of total clients. Investment advisors manage $12.8 trillion on behalf of individuals, the report found.
• The industry continues record-breaking job growth, creating 15,000 investment advisory positions since the 2019 report. As per the Form ADVs filed earlier this year, SEC-registered advisors reported a total of 871,971 nonclerical employees—up 4.4% over the prior year. Of these employees, more than half (451,536) provide investment advisory services (including research).
• The vast majority of SEC-registered investment advisors are small businesses, with 57.4% (7,749) of advisory firms reporting they employ 10 or fewer non-clerical employees, and 87.6% (11,819) reporting employing 50 or fewer non-clerical individuals. At the opposite end of the spectrum, the largest 116 firms employ 53.7% of all non-clerical employees.
• The “typical” RIA had $341 million in assets, 141 clients, 8 employees, exercises discretionary control over clients’ investments and operates as a limited liability company, the report found.
• The bulk of industry regulatory assets under management, or RAUM, resides in pooled vehicles. Registered investment companies ($33.3 trillion) and private pooled investment vehicles ($26.0 trillion) together represent $59.4 trillion, or 61.1% of the total $97.2 trillion RAUM. The number of private pooled investment vehicle clients is up by 4.9%.