Registered investment advisors are clearly on the up and up, and the growth of the sector is exerting pressure on how ETFs and mutual funds are distributed and marketed.

RIA and dually registered advisory channels will grow their share of the advised assets to 26% by 2016, up from 21% today, according to a recent report by Cerulli Associates. That growth will largely come at the expense of the wirehouse channel, according to Cerulli. According to the research firm, headcount in these channels is expected to grow, but at a lower rate than assets. Advisor count should increase from 15% today to about 17.5% through 2016.

These shifts in advisor assets have several implications for mutual fund and ETF providers, says Deborah Fuhr, managing partner and co-founder of consulting firm ETFGI. "The biggest challenge is that in terms of ETF assets under management, the RIA channel is becoming more important, controlling just slightly more than the wirehouses," Fuhr explains. "With wirehouses, you know who and where the firms are, and the home office decision-making is pretty consistent."

RIAs, on the other hand, are significantly more dispersed. Some RIAs are small and some are large in terms of assets they are managing as well as the number of RIAs. The smaller firms with two to five RIAs often do not have the infrastructure to do the due diligence role in house, Fuhr says. "Furthermore, there are around 14,000 firms which are all over the U.S., which is a challenge for fund companies to market and distribute to."

For mutual fund and ETF providers to distribute and market products most effectively to the RIA community, fund managers, consultants and others note that providers must adjust their approach. RIAs are not a homogeneous group, so providers need to figure out what the commonalities with different RIAs are. Are they more inclined to want packaged solutions, for example?

Providers aren't there yet, Fuhr says, but they're getting closer.

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