The last few years have been marked by a notable rise of the registered investment advisor (RIA) channel within the financial services industry. Despite the slight decline in RIAs at the peak of the pandemic, which was likely due to infrastructure needs as a result of stay-at-home orders, the RIA channel continues to lead the industry in growth, according to Cerulli Associates’ annual RIA Survey.
This RIA growth comes both in terms of headcount and assets under management (AUM). Over the last decade, the headcount was up 5.5% for hybrid RIAs and 3.3% for independent RIAs. Looking at AUM, hybrid RIAs grew 13.6% in 2022, while independent RIAs grew 12.9%. In comparison, over that same timeframe, wirehouses only gained 7.4% in assets.
While the RIA channel is seeing growth in headcount and AUM, it has actually lost 1% of its firm count annually over the last five years, with a 6% loss from 2020 to 2021. Looking at the landscape as a whole, many advisors who are breaking away are choosing to tuck-in to existing firms as opposed to venturing out fully on their own.
Also notable is the fact that many of the smaller RIA firms are being acquired by the bigger ones or end up consolidating with another RIA. This is especially the case as the owners of smaller firms start thinking about succession. These factors have created a shift in the composition of the RIA space from one that is built up with many smaller firms to one that is being dominated by big players.
As the RIA space continues to grow, it will continue to be a compelling option for advisors looking for more freedom and control over their business. With a few different options for RIAs to choose from, 3xEquity can help you figure out what path is right for you. Fill out the form below to get started.