August 14, 2012
--- Registered investment advisers (RIAs) with more than $500 million in assets under management, on the other hand, invest more in alternative investments, a report found. ---
This defies the prevailing wisdom that the RIA marketplace
is splintered, with all RIAs assumed to be unique. Thus, it is possible for
asset managers to develop a strategy to work with different RIA groups—and they
would be wise to target the underserved, mid-RIA market, Cerulli Associates said.
Further, unlike their broker/dealer counterparts, midsize RIAs do not require
funds that carry revenue-sharing commissions—rendering this subset of the RIA
channel more profitable than dealing with large RIAs or broker/dealers, Cerulli
said in its August report on U.S. asset management.
It is also easier to reach RIAs than it is broker/dealers,
which have gatekeepers to screen product offerings, Cerulli noted. In addition,
RIAs do not have the luxury of sales support, market commentary, asset-allocation
tools or research.
Half, or 49%, of midsize RIAs said they use mutual funds,
compared with 39% of RIAs with more than $500 million in assets under
management, Cerulli found in the survey.
The key is to approach midsize RIAs with low-cost mutual
funds and ETFs, Cerulli said. “Advisers within midsize practices have neither
the time nor the accumulated expertise to personally manage client
relationships alongside well-diversified portfolios built upon individual
securities,” the Cerulli report said. “Thus, these advisers rely on fund
managers to fill gaps in the money management expertise of the RIA practice.”
Tyler Cloherty, senior analyst at Cerulli Associates, commented:
“Industry experts quip that ‘every RIA
is different,’ but they neglect the fact that distinct product preferences
separate midsize firms from their larger counterparts.”