Data & Research August 31, 2011

Number of RIAs Declines, Yet Total AUM Increases

An annual report examining SEC-registered investment advisers found that, although the total number of RIAs declined for the first time since 2001, the total assets under management (AUM) rose by nearly 14%.
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The Investment Adviser Association (IAA) and National Regulatory Services (NRS) issued their eleventh annual report, “Evolution Revolution,” examining trends of the investment advisory profession by looking at annual updates filed by investment advisers registered with the Securities and Exchange Commission (SEC). The 2011 report is based on information on file with the SEC as of May 1, 2011.

This year’s report notes that the total number of SEC-registered investment advisers (RIAs) declined from 11,643 in 2010 to 11,539 in 2011. While relatively small, this is the first annual decrease in the number of investment advisers since publication of the report began in 2001. On the other hand, total assets under management (AUM) reported by all investment advisers on May 1, 2011, were $43.8 trillion, representing a 13.7% increase from the $38.6 trillion in AUM reported in 2010. This is the highest level of total AUM ever reported.

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Consistent with previous years, the 2011 report confirms that a relatively small number of large investment advisory firms manage a high percentage of total AUM. The 78 largest advisers (i.e., those that manage $100 billion AUM or more) managed over half (50.9%) of total AUM. Similarly, the 565 advisers with $10 billion AUM or more reported managing 84.4% of all assets.

The report emphasizes that the vast majority of SEC-registered investment advisers are small businesses. In 2011, 81.2% of advisers reported managing less than $1 billion AUM, and 41.3% reported managing less than $100 million AUM. Almost half of all advisers (49.8%) reported fewer than five full- and part-time, non-clerical employees. More than two-thirds of all advisers (68.8%) employed fewer than 10 full- and part-time, non-clerical staff, and more than 9 in 10 (90.6%) employed fewer than 50.

“There will be dramatic shifts in the profile of the investment advisory profession when certain provisions of the Dodd-Frank Act are implemented next year,” said David Tittsworth, Executive Director of the IAA. “It is estimated that about 3,200 smaller investment advisers will switch from SEC to state registration. With the addition of about 700 private fund advisers, we expect that the universe of SEC-registered advisers will shrink to about 9,000, representing a 17% decrease.”

Evolution Revolution examines information the SEC requires investment advisers file annually. This includes information on assets under management, employees, advisory and other business activities, clients, custody, disciplinary history, and other data. Copies of the report may be obtained by contacting IAA or NRS.

A PDF version of the report is available here.

Data & Research August 31, 2011

Politics More to Blame than Markets for Drop in Confidence

Spectrem Group reports that its Spectrem Affluent Investor Confidence Index fell nine points in August to -18, its lowest level in a year.  
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Spectrem also keeps track of millionaires with the Spectrem Millionaire Investor Confidence Index, which fell four points to -9, considered to be a neutral level.   

The decline brings the affluent index, which measures the investment confidence and outlook of households with $500,000 or more in investable assets, to its lowest level since August 2010, when it stood at -20. Spectrem sees this as being in mildly bearish territory, down from neutral in July.

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“This truly tumultuous month for the stock market has clearly unnerved America’s affluent investors, who have focused their attention on the political environment and market conditions,” said George H. Walper, Jr., President of Spectrem Group.

In response to an open-ended question about the news story most affecting their economic outlook, affluent investors in August cited: the political environment (28%); stock market conditions (12%); unemployment (10%); the economy (9%); the deficit (8%); international problems (7%), and gas and oil prices (1%).   Those citing the political environment rose from 17% in May 2011 (the last time this question was asked), and those citing stock market conditions rose from 3%.

Millionaires were more focused on the political environment (32%) than the affluent and were equally focused on unemployment (10%).

The Spectrem Affluent Investor Confidence Index is based on 250 monthly email interviews with the financial decision-makers in households with $500,000 or more in investable assets. The Spectrem Millionaire Investor Confidence Index is based on a subset of the overall survey group.

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