RIA assets are expected to account for approximately a quarter of the financial advisor asset marketshare by the end of next year, according to research from Boston-based global analytics firm Cerulli Associates.
The advisor channel is still the fastest-growing segment of the financial services industry thats why people are flooding toward it, Chip Roame, the managing principal of Tiburon Strategic Advisors, said early last month at Tiburon's CEO Summit in New York City.
What's driving that growth? Tyler Cloherty, associate director at Cerulli, points to these factors:
- Advisors are moving to RIA practices to start their own practice or join existing practices from wirehouses, independents, and regionals. That movement largely stems from the additional flexibility that comes with running your own firm, with potential to own and monetize your practice, Cloherty says.
- More investors are choosing to do business with RIAs. They're also more likely to recommend their own advisor as opposed to recommending from other channels.
- Investors coming out of the financial crisis have expanded the number of relationships they maintain. This is especially true with more affluent investors. The RIA channel has been a beneficiary of this trend.
Sccording to Cerulli, because the RIA channel's growth has outpaced the industry, it's drawing increased interest among asset managers eager to capitalize on that growth.
"Asset managers are dedicating more resources to the RIA channel -- more marketing efforts and thought leadership is going toward advisors with affluent clients. Even insurance companies who have traditionally been commission-focused have increased efforts to attract the fee only advisor," according to Cloherty.
Meanwhile, many RIAs are seeing greater potential by migrating to institutional clients, managing money for pensions, endowments and foundations, and insurance companies for example. To support that trend, Cerulli suggests asset managers leverage their internal institutional sales resources to concentrate efforts on institutionally focused RIAs. "Insight into manager selection and asset allocation procedures can support both institutional and retail sales, even though investment policies are likely to differ," Cerulli's report notes.