Compliance August 12, 2015

Form 5500 Filing Extension Extended

Also extended is a provision in prior pension reform allowing over-funded pensions to use their excesses to fund retiree health and life insurance benefits.
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The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (H.R. 3236), signed by President Obama on July 31, 2015, extends the due date for many tax returns.

Among those of importance to retirement plans, the bill provides that the maximum extension for the returns of employee benefit plans filing Form 5500 shall be an automatic 3 1⁄2-month period ending on November 15 for calendar year plans. In addition, the maximum extension for the returns of organizations exempt from income tax filing Form 990 (series) shall be an automatic 6-month period ending on November 15 for calendar year filers.

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The extensions are effective for returns for taxable years beginning after December 31, 2015.

The bill also extends a provision in prior pension reform allowing over-funded pensions to use their excesses to fund retiree health and life insurance benefits.

The Moving Ahead for Progress in the 21st Century Act (MAP-21), passed in July 2012, included a provision extending the ability of employers to transfer excess pension assets to fund retiree health benefits and expanding the provision to allow transfers for retiree life insurance. H.R. 3236 extend the time period for using these excess assets from 2021 to 2025.

Data & Research August 12, 2015

RIA Industry Stats Show Client Base Growth, Challenges

Since 2014, RIAs have added 31,157 non-clerical jobs, a 4.3% increase.
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The registered investment adviser (RIA) industry continues to grow at a strong pace, according to the “2015 Evolution Revolution” report from the Investment Adviser Association (IAA) and National Regulatory Services.

RIAs’ assets under advisement (AUA) have risen 8.1% since 2014 to $66.7 trillion, up from $61.7 trillion. IAA said the increase in assets is due to both rising markets and the increase in the number of RIAs and clients. The RIAs represented in the report include individual and corporate RIAs—all types of RIAs registered with the Securities and Exchange Commission (SEC).

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The largest firms manage more than half of the assets. This year, 128 RIAs manage $100 billion or more in AUA. While these RIAs account for only 1.1% of SEC-registered advisers, they manage 54.9% of all AUA. On the other end of the spectrum, 71.3% of RIAs manage less than $1 billion, and they collectively managed only 3.3% of all AUA.

Since 2014, RIAs have added 31,157 non-clerical jobs, a 4.3% increase. The RIA industry now employs a total of 750,795 non-clerical employees. The number of RIA firms grew by 578 to 11,473 firms, a 5.3% increase from 2014. This is the largest increase in four years. The number of clients they served rose to 29.7 million clients, a 6.8% increase from 2014, when RIAs served 27.8 million clients. “This increase of 6.8% underscores the continuing health and growth of the advisory profession,” IAA says.

While 42.5% of RIAs report having more than 100 clients, 27.6% have between one and 10 clients, and 16.8% have between 26 and 100 clients. Nearly 60% of RIAs say they have a least some high-net-worth clients, and 51.6% say they have some non-high-net-worth clients. Nearly half (47.1%) say that at least one client is a pension or a profit-sharing plan.

The report explains some advisers serve a broad range of clients, but nearly two-thirds primarily depend on one client type. “More than one in five advisers (22.8%) derive most of their AUA from pooled vehicles other than mutual funds and ETFs,” IAA finds. “Similarly, another 29% specialize in serving individuals. And while nearly half of advisers have at least one pension client, only 2.7% primarily serve pension clients.”

The report shows about 47% of RIAs do business with at least one pension plan, including about 3,800 advisers with pensions making up 10% or less of their client base. Among the advisers that derive more than 75% of their AUA from a single type of client, 21.5% specialize in pooled investment vehicles, 11.4% in non-high-net-worth individuals, 10.9% in high-net-worth individuals, 3.6% in investment companies and 2.2% in pension and profit-sharing plans. IAA 

RIAs are compensated in a number of ways, but asset-based fees continue to dominate the investment advisory profession, used by 95.0% of RIAs. That is followed by fixed fees, used by 41.5%, performance-based fees (38.9%) and hourly charges (27.8%).

The report is based on Form ADV, Part 1 data that RIAs file with the Securities and Exchange Commission as of April 8, 2015. The full report can be downloaded here.

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