The registered investment advisory firm milestone of reaching $1 billion in assets under management holds cachet for many financial advisors, even though it's becoming less rare in the industry.
Only 412 RIAs, or less than 3% of those registered with the Securities and Exchange Commission, have topped that high bar in their client AUM, according
Regardless,
"You're going to start to see advisors teaming together to achieve the scale and the service model that they want to have for their clients," Voss said. "They're going to move and consolidate with advisors who complement their skill sets. You're probably going to start to see that percentage rise as firms come together in the RIA world to achieve scale."
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The numbers and the data limitations
RIAs with at least $1 billion in AUM "may have found their success through various avenues — whether by
In terms of the share of those $1 billion RIAs in each state, high-population New York (21%), California (14%), Texas (8%), Florida (7%) and Illinois (5%) lead the way. When comparing the number of RIAs of that size to the total number in each state, Alaska (13%) was No. 1, followed by Montana (11%), Nebraska (6%), Maryland (4.8%) and Wisconsin (4.6%). Alabama, New Hampshire, Arkansas, Maine, Mississippi, New Mexico, Hawaii, Wyoming, North Dakota, South Dakota and West Virginia had no $1 billion RIAs without any disclosures.
The slim ranks of firms with over $50 billion in AUM included some RIAs that provide direct, retail wealth management and comprehensive planning services, along with others better known for funds, insurance, employer retirement plans or other financial sectors: City National Rochdale, Rockefeller Capital Management, BlackRock Financial Management, Barings, Savant Wealth Management, Taylor Advisors, Focus Partners Wealth, Flexpath Strategies and Sammons Financial Group Asset Management.
Like with any study
In the past six years, 654 wealth management firms of that size have sold a majority or minority of their equity — 38% of overall industry M&A volume during that span,
"The overall growth in the number of transactions involving wealth managers with at least $1B in AUM has been strong since 2019, expanding at an annual rate of 19.7%. However, the progression is anything but linear," Echelon's report said. "The rebound is a sign that demand for platforms of this size is again increasing, driven by favorable market conditions and robust buyer interest. Many of these $1B firms are professionally managed with strong infrastructure, making them attractive platforms for acquirers entering a new geography."
A third industry tracking study showed that just shy of one-third of SEC-registered RIAs of any type have at least $1 billion in AUM. The share expanded to 31.6% of firms last year from 28.6%
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Stay focused on the mission
Those numbers add context to any claim that reaching $1 billion in AUM is unattainable for startup RIAs. And
Nevertheless, that milestone still holds a lot of sway among advisors, much like
"That's catchy, it's trendy, it's what everyone wants to hear. Nobody wants to say they manage $800 million," Voss said. "It sounds great, it sounds wonderful, but how do you achieve it? How do you execute on it? If everyone had the answer, we would have more billion-dollar firms out there. That applies to anything in life. As long as you stay focused on your 'why' and the purpose of what you're trying to accomplish, I think anything's achievable. You just have to stay rooted into the true reason of what you're trying to accomplish."