RIAs Gaining Market Share While Wirehouses Shrink

New research from global analytics firm Cerulli Associates suggests that asset managers identify registered investment advisers (RIAs), broker/dealers, mega teams, and home-office due diligence relationships as the groups with the most opportunity to generate revenue and increase market share.

These groups are also spearheading the trend toward more data-focused interactions, which traditionally have been reserved for the institutional space, the firm notes

“In our survey of national sales managers, 67% rank increasing the technical skills of existing wholesalers to address more sophisticated adviser teams as the top priority,” says Emily Sweet, senior analyst at Cerulli. “We believe this expanding institutional influence in the retail market, especially in the areas growing most quickly, will continue for the foreseeable future.”

According to Cerulli Associates, 95% of national sales managers agree or strongly agree that data analytics are essential to making key decisions in areas such as budget planning and adviser segmentation. The firm expects asset managers to keep increasing analytics resources as long as internal and partner firm inputs become more reliable and adoption by sales teams increases.

The firm expects RIAs to continue to increase their market share while that of wirehouses decreases. Cerulli Associates found that in 2015, the RIA channel grew assets faster than any other adviser channel at 6.2% growth versus an average of 0.9% for all channels. Meanwhile that year, the wirehouse asset base shrunk 1.9%, ranking as the poorest-performing adviser channel in terms of asset growth.

Cerulli projects that independent RIAs and hybrid RIAs will together increase asset market share from 23% in 2015 to 28% in 2020.

“While wirehouses still hold a substantial share of assets, RIAs are the growth story,” explains Kenton Shirk, associate director at Cerulli. “To build a relationship within an independent practice, wholesalers need to truly understand a firm’s investment philosophy and decision-making process.”

Cerulli’s latest report, U.S. Intermediary Distribution 2016: Evolving Roles in Distribution, focuses on the convergence of the institutional and retail markets and its influence over distribution strategies, the firm says. In addition, the report analyzes trends related to adviser product use, portfolio construction, and allocation changes across industry segments.

It can be purchased online here.