Where the Assets Are Growing Fastest: RIA vs. Wirehouse vs. Dually Registered Firms
The dually registered and registered investment advisor channels were the fastest-growing for assets under management from 2010 to 2011, Cerulli Associates reported today -- but the two are still dwarfed by assets in the wirehouse channel.
Dually registered assets grew 19%, rising from $772.8 billion in 2010 to $920.7 billion in 2011, according to the Cerulli report, The State of the U.S. Retail and Institutional Asset Management 2012. RIA assets increased 13%, from $1.234 trillion to $1.416 trillion.
Wirehouse assets for 2011, meanwhile, declined slightly to $4.764 trillion from $4.778 trillion the previous year.
GRADUAL SHIFT FROM WIREHOUSES
Advisor transitions, investor choice, and organic growth have favored growth in the RIA and dually registered channels, Cerulli associate research director Tyler Cloherty said in a statement accompanying the report. As advisors move into the RIA and dually registered channels, many new entrants will be progressively smaller, but this is contributing to significant growth within the channels."
The most significant take-away for advisors? They are taking increasing market share from other distribution channels, mainly the B-D advisor intermediated assets, such as wirehouses, Cloherty told Financial Planning. RIA assets are also growing faster than bank trust, direct and private client groups, he added.
HIGH COST STRUCTURES
One reason for the shift is the wirehouse cost structure.
"Wirehouses are raising the cost of doing business through higher platform fees and more expensive revenue-sharing agreements, which asset managers are willing to pay," Cloherty said. "At the same time, this is leading some managers to increase their focus on the RIA market due to the lower cost of doing business in the space. However, the sheer size of the wirehouse channel means it will remain a primary target for asset managers."
Assets will remain concentrated among wirehouse advisors, the Cerulli report predicted. But as the number of wirehouse advisors continues to dwindle, the study noted, asset managers will be forced to reorganize their wholesaling teams to include coverage of the RIA channel.