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RIAs find themselves forced to keep up with a world changing on many fronts—an evolving client base, shifting regulations, new technological possibilities and demand for new services. Even as financial markets provide a tailwind for their firms, new technologies and new business models are surfacing to continuously challenge them.

That said, the independent advisor channel continues to balloon and the largest RIAs are accumulating large sums of assets. But they’re also forced to be nimble to keep up with the industry’s evolution.

The RIA channel eclipsed $70 trillion in registered assets under management in 2017, according to a study sponsored by the Investment Adviser Association. In the 17 years the IAA has tracked RIA growth, AUM has grown by a cumulative 220% and at a compound annual growth rate of 8.1%.

There are more than 680 RIAs with at least $1 billion in client assets, according to a November 2017 Cerulli Associates report. This club accounts for less than 4% of the total number of RIAs, but controls 32% of the RIA channel’s workforce and 60% of its assets.

Larger RIAs have grown in part because the entire RIA segment is attracting new advisors, many of them breakaways from wirehouses who bring assets to the channel by joining an RIA or starting their own firm.

The main draw to the channel is the idea that they will be placing the clients’ interest ahead of their own, a development the public is increasingly aware of. The fiduciary model actually allows them more flexibility to find investments, says Erik Morgan, senior partner and advisor with Freestone Capital Management, a Seattle-based RIA founded in 1999 that has grown into a $4.2 billion firm, largely by working with high-earning technology workers in the Puget Sound region.

That ability to serve clients better is one of the reasons advisors moving from a brokerage firm to the RIA channel end up happier and wealthier, according to the March 2018 “Independent Advisor Sophomore Study” from Charles Schwab.

High-net-worth clients are especially aware of the difference in models, says Drew McMorrow, president and CEO of Boston’s Ballentine Partners, which serves such elite clientele. “There’s a simultaneous growing awareness that a tax-sensitive, risk-aware investment approach can be a very successful strategy, and that’s adding to our ability to market,” says McMorrow, whose firm has garnered some $6.7 billion in AUM since its 1984 founding.

Out Of The DOL Frying Pan

The Department of Labor’s fiduciary rule, which would have deemed any advisor rendering recommendations within retirement accounts as fiduciaries, has fallen by the wayside. On March 15, the U.S. Fifth Circuit Court of Appeals vacated the rule.

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