The Investment Adviser Association and National Regulatory Services (the "Associations") reported on the state of the SEC-registered investment advisers profession "based on data from before the coronavirus (COVID-19)." The report included information on the number of investment advisers, regulatory assets under management, industry concentration, and investment adviser compensation.
According to the annual report, the typical SEC-registered investment adviser has eight employees, 141 accounts and $341 million in regulatory assets under management. With regard to industry concentration, a fairly small group of advisers manages the majority of regulatory assets under management ("RAUM"): the number of advisers managing over $100 billion represents only 1.3 percent of all SEC-registered advisers; yet, this group manages 63.8 percent of all RAUM. The Associations noted that the number of SEC-registered investment advisers continues to rise, as does the aggregate RAUM managed by investment adviser, though there has been a steady decline in the number of broker-dealers.
In addition, the Associations highlighted that the growth of private equity funds outpaced that of hedge funds. On the topic of digital advice platforms, the Associations stated that of the top five advisers, two served as digital advice platforms, representing clients that tend to have lower (and sometimes zero) account balances.
One of the most interesting statistics in the IAA report is the steady rise in the number of investment advisers (up from about 11,000 in 2014 to about 14,000 in 2020) compared to the steady decline in the number of broker-dealers (down from about 4,000 to about 3,500 in the same time period). (See Page 38 of the report.)
Doubtless there are many causes for the decline in the number of broker-dealers, but regulation has to take some share of the responsibility for the decline. There has been concern that the adoption of Regulation Best Interest would do significant damage to the business of providing "full service brokerage." See Choose One - Best Interest or Full Service. In this regard, it would be interesting to know how many of the remaining broker-dealers (i) actually make a business out of providing full service brokerage and (ii) are dually registered firms that provide advice to natural persons wearing their "adviser" hats and charging advisory fees rather than through their broker-dealers.
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