In PracticeAugust 14, 2007

Pershing Study Reports Rapid Growth in RIA Market

The registered investment adviser (RIA) market will continue to experience rapid growth in the next five years says a new study from the Pershing Advisor Solutions LLC unit of The Bank of New York Mellon and Moss Adams LLP.

Reported by Rebecca Moore

The study estimates the number of retail-focused advisory firms will grow to over 19,000 from the current 15,500 in the next five years, according to a press release.

The study report, “Uncharted Waters: Navigating the Forces Shaping the Advisory Industry,” indicates that advisory firms will need to educate consumers, take new steps to frame the public’s understanding of advisory services, and clearly define the industry’s quality standards.

The top three challenges that RIAs will face over the next five years, according to the report, include:

Dramatic growth of the RIA market is expected to fuel increased competition: Demand for comprehensive and objective financial advice is growing rapidly. The study predicts that the average independent registered investment adviser will exceed $1 billion of assets under management by 2012.
Growing demand for advice will come from increasingly sophisticated clients: RIAs have enjoyed a strategic advantage for the last five years as consumers sought objective advice and a departure from commission-based compensation models. However, as competitors converge and consumers’ needs change, to be successful, RIAs will need to distinguish themselves from new competitors, explore opportunities to be more specialized and identify meaningful market niches where they can lend expertise;
Competition among RIAs is for top talent: Moss Adams forecasts that by 2012, there will be close to 52,000 independent registered investment advisers practicing inside RIA firms. According to the study, 37% of advisory firms are actively recruiting RIAs.

“As the business landscape and RIA market both continue to rapidly evolve, especially in light of changes driven by the Pension Protection Act and the recent ruling surrounding fee-based brokerage accounts, independent registered investment advisors will continue to face unique challenges to service their clients and grow their businesses,” said John Iachello, chief operating officer of Pershing Advisor Solutions LLC, in the release.

For a copy of the executive summary and full report, e-mail Pershing Advisor Solutions at pasinformation@pershing.com.