Competition High in RIA Channel

Fewer than 1,500 of the more than 16,500 firms in the channel manage 90% of the assets, resulting in a short list of frequently targeted firms, according to research from Cerulli Associates.

Assets have consolidated in the RIA segment, causing the asset management distribution process, adviser portfolios and product demands to evolve.

“More than 80% of RIA firms fall below the $100 million asset threshold used by many asset management distributors to justify sales focus,” said Scott Smith, head of Cerulli’s intermediary practice. “Asset managers searching for untapped markets will be unimpressed with the lack of assets at the lower tier of the RIA market.”

Cerulli’s research also found that although assets grew 16.6% from year-end 2009 to year-end 2010, the number of firms in the RIA space actually fell 1.1%. Rather than a sign of slowing growth in the channel, Cerulli analysts think this represents a beneficial maturation in the channel as less successful firms left the industry, and incoming advisers increasingly chose to join existing practices instead of starting their own.

Cerulli predicts there will be a continued increase in asset growth as larger RIA practices target advisers in the wirehouse and regional channels who want increased independence without the complications of starting a small business.

This research is from “Cerulli Special Quantitative Update: Registered Investment Advisor Market.” For more information on the report, contact CAmarketing@cerulli.com.