Registered Investment Advisors (RIAs) are experiencing faster growth in head count compared to national brokerage firms, signaling a shift in the industry. While RIAs have made significant strides, they still have ground to cover to catch up in terms of asset levels.
According to data from research firm Cerulli Associates, RIAs are expected to expand their market share in the coming years, potentially at the expense of their counterparts.
The “wirehouses,” which refer to the large national brokerage firms, currently claim 15.1% of advisors and hold 34.1% of the asset market share as of 2022. In comparison, independent RIAs have 15.3% of advisors and a 15.7% share in assets. Hybrid RIAs account for 11.6% and 11% respectively.
At present, the majority of advisors operate within broker-dealers or brokerage firms just below the wirehouses in terms of size. Cerulli reports that there are 189,762 financial advisors affiliated with the top 25 broker-dealers by headcount, comprising 65.3% of the industry. The five largest brokerage firms, in terms of assets by 2022, are Morgan Stanley, Merrill Lynch, Edward Jones, UBS, and Wells Fargo.
In contrast, there are currently 18,558 RIAs, employing a collective total of 78,282 advisors. Together, they manage an impressive $7.1 trillion in assets as of year-end 2022, according to Cerulli’s research.
The data hints at a significant evolution in the financial advisory landscape, with RIAs poised to continue growing and challenging the dominance of traditional brokerage firms. As the industry unfolds, all eyes will be on how these trends materialize in the coming years.
The Growth of Independent Advisors
The financial advisory industry has seen significant growth in the independent Registered Investment Advisor (RIA) sector. Many customers now prefer to work with independent advisors, which has contributed to this rapid expansion. In addition, more advisor teams are leaving national brokerage firms to establish their own independent firms. This shift allows them to maintain greater control over their books of business. These trends show no signs of slowing down.
According to Andrew Blake, associate director at Cerulli, while the wirehouse channel still dominates in terms of industry assets and average advisor productivity, the appeal of independence lies in the flexibility it offers and the higher payout percentages. Many advisors find these advantages irresistible.
Over the past decade, the number of independent RIA firms has grown at a compound annual growth rate (CAGR) of 2.4%, as reported by Cerulli. At the same time, the number of advisors operating at independent RIAs has grown at a CAGR of 5.2%.
Looking ahead, Cerulli projects that the overall number of advisors will remain relatively unchanged over the next five years. However, by 2027, the research firm predicts that RIAs will control nearly one-third of the market share for assets.