The universe of federally registered investment advisers continued to grow in 2017, as did the total of their aggregate regulatory assets under management (RAUM) – which now stands at a record high of $70.7 trillion.
The just-released 2017 Evolution Revolution also shows that the investment adviser profession remains a powerful provider of high-quality jobs as it evolves to meet the demands of a growing, tech-savvy client demographic.
The 17th edition of this annual joint study by the Investment Adviser Association (IAA) and National Regulatory Services (NRS), which is integrated with Accuity, paints a picture of a strong industry that has remained resilient in the midst of significant change.
Derived from Form ADV, Part 1 data filed by all SEC-registered investment advisers as of April 10, 2017, 2017 Evolution Revolution is the most comprehensive profile of advisory industry metrics available. This year’s key findings include:
- The number of SEC-registered investment advisers continues to grow. The universe of SEC-registered investment advisers grew to 12,172 in 2017, a net increase of 2.7 percent.
- The industry continues to experience strong job growth in investment advisory positions. In 2017, advisers reported a total of 778,002 non-clerical employees – relatively flat since 2016. Of these employees, however, 400,163 provide investment advisory services (including research) – a healthy increase of 13,631 since 2016.
- The vast majority of SEC-registered investment advisers are small businesses. In 2017, 56.8 percent (6,911) of advisory firms reported that they employ 10 or fewer non-clerical employees and 87.4 percent (10,641) reported employing 50 or fewer individuals. Industry-wide, the median number of employees is nine.
- Aggregate RAUM managed by SEC-registered advisers remains substantial – $70.7 trillion – up from last year and a record high. RAUM managed by advisers grew a healthy 5.8 percent, up from $66.8 trillion in 2016. This RAUM growth is likely primarily a function of strong stock market performance in the past year.
- Federally registered investment advisers serve more than 35.6 million clients – While initial statistics showed that the number of clients served by investment advisers dropped 2.1 percent since 2016, after taking into account changes in definitional methodology and a reporting error, the number did not in fact decline. The number of advisers reporting that they provide advice exclusively through an interactive website rose by 20 firms – nearly 16 percent – to 146.
- Individuals comprise the largest categories of advisory clients, with pension plans coming in second. Almost 61 percent of advisers serve either high net worth individuals, non-high net worth individuals, or both, while 45.6 percent reported that at least one client is a pension or profit-sharing plan (excluding plan participants or state or local pension plans). Estimates show that individual clients represent $8.9 trillion, and pension and profit sharing clients represent $6.2 trillion, of the total $70.7 trillion RAUM.
- Most investment advisers focus on one category of client. More than 87 percent of advisers report that a majority of their clients are attributable to a single category of client. For example, 51 percent of advisers report that more than half of their clients are individuals. Another 29 percent report that most of their clients are pooled vehicles (registered or unregistered). Many of these advisers serve pools exclusively: 2,195 report that 100 percent of their clients are private funds, while 298 advisers report that 100 percent of their clients are registered funds. More than seven percent of advisers specialize in non-pooled institutional clients.
- The average RAUM per client is just under $2 million. The average varies significantly across different segments of advisers, based on their overall RAUM and number of clients. Those advisers with fewer clients tended to have a larger RAUM/client average. Additionally, those that have a higher aggregate RAUM tended to have a larger RAUM/client average.
- The number of private funds and registered private fund advisers is growing. In 2017, 4,574 advisers reported advising 34,409 private funds with total gross asset value of $11.5 trillion (up from 4,448, 32,445, and $10.5 trillion respectively in 2016). While the percentage of hedge funds and private equity funds was equal last year, there is now a divergence. Private equity funds are making gains, while hedge fund growth is stagnant; tracking with the past year of hedge fund performance issues and closures. Hedge funds now make up 33.8 percent and private equity funds represent 37.2 percent in the private fund space.
“This year’s findings demonstrate that the investment adviser industry remains robust and continues to expand, providing high-quality jobs to our economy,” said IAA President & CEO Karen Barr. “More importantly, they demonstrate that our industry is flexible and resilient, adapting successfully to the rapid pace of change in the financial services ecosystem.”
“Technological advancement and automation in the investment adviser industry is both a response to client needs and expectations and a driver that is expanding the client base for financial advice,” said NRS President John Gebauer. “This report shows that Advisers have evolved and specialized their practices to reach their clients.”
About the Investment Adviser Association
The Investment Adviser Association (IAA) is the leading trade association representing the interests of SEC-registered investment adviser firms. The IAA’s more than 600 member firms collectively manage approximately $20 trillion in assets for a wide variety of institutional and individual investors. In addition to serving as the voice of the advisory profession on Capitol Hill and before the SEC, DOL, CFTC and other U.S. and international regulators, the IAA provides extensive compliance and educational services to its membership. For more information, visit www.investmentadviser.org or follow us on LinkedIn, Twitter and YouTube.
Owned by the RELX Group, National Regulatory Services (NRS) is part of Accuity, the global standard for payment efficiency and compliance solutions. NRS is the US leader in compliance and registration products and services for investment advisers, broker-dealers, hedge funds, investment companies and insurance institutions. NRS has the practical expertise, proven capability and unparalleled reach to deliver integrated and effective compliance solutions to a wide range of users within the financial services industry. NRS delivers these solutions through three interrelated offerings – comprehensive education, best-in-class technology and expert consulting services – enabling our clients to meet their regulatory requirements and minimize risk. For more information, visit www.nrs-inc.com or follow us on LinkedIn and Twitter.
Accuity offers a suite of innovative solutions for payments and compliance professionals, from comprehensive data and software that manage risk and compliance, to flexible tools that optimize payments pathways. With deep expertise and industry-leading data-enabled solutions from the Fircosoft, Bankers Almanac and NRS brands, our portfolio delivers protection for individual and organizational reputations.
Part of RELX Group, a world-leading provider of information and analytics for professional and business customers across industries, Accuity has been delivering solutions to banks and businesses worldwide for 180 years.