“RIA channel growth has significantly outpaced industry growth,” Tyler Cloherty, senior analyst at Cerulli, said in a press release. “Firms with over $1 billion in assets tend to draw more of their assets from high-net-worth assets. These aggregator RIAs have been successfully recruiting advisors who want to focus on serving clients instead of running a business.”
The research, which is part of Cerulli’s State of the RIA Market 2012 report that analyzes the overall trends in the RIA market, presents findings from two surveys, one of RIA and dually registered advisors and the other a survey of RIA servicing agents that make up over 65% of the industry.
New money in the industry is primarily contributed by clients, according to the Boston based research firm says. The survey found that 43% of new money is generated by new clients followed by 23% from regular contributions from existing clients.
The RIA channel has drawn more than 1,500 advisors from across the industry, managing on average $48 million per advisor the report says.
Dually registered RIA channels have been successful in the past year, according to the Cerulli report. The channel has logged the highest growth by both assets and advisors.
The success of the RIA channel has also been driven by plain vanilla investments. Portfolio allocations of RIA have leaned heavily towards safe investment havens in the year, the report said. Advisors have increased allocation to corporate bonds, cash and domestic equity to hedge against risks abroad and perceived risks in government debt. In 2012, on an average, 36% of the portfolios of RIAs consisted of domestic equity investments. Investments in U.S. government bonds have decreased to 8.3% of the portfolio from 9.9% of the portfolio in 2011.
Cerulli said the continued expansion of the channel is undeniable and broker dealers should embrace the dual registration business model in the future.