This signifies the first time the RIA channel grew at a faster pace on a percentage basis than all other retail channels—including independent broker/dealers (B/Ds)—according to a new analysis released by Access Data, a Broadridge Financial Solutions, Inc. company.
“As investors continue to gravitate toward independent advice models, we expect to see sustained growth in the RIA channel,” explains Frank Polefrone, a senior vice president at Access Data. “For the first half of 2014, the RIA channel had the largest increase in absolute dollars for both ETFs and long-term mutual funds across all channels.”
According to Access Data, the RIA channel accounted for $1.8 trillion in long-term mutual fund and ETF assets under management in the first half of the year, an increase of almost $200 billion over the end of 2013. Additional key findings generated by Broadridge’s fund distribution intelligence tools show total third-party, long-term mutual fund and ETF assets under management have increased to $9.3 trillion, up from $8.5 trillion at the end of 2013 for about a 9.8% increase.
For all retail channels combined—including RIAs, independent and regional B/Ds, wirehouse B/Ds, and discount brokers—assets under management stand around $6 trillion. This is about 64% of all third party distribution of long-term mutual funds and ETF assets, Access Data says.
Earlier this year, Broadridge issued an in-depth report on RIAs, “The RIA Channel – A Roadmap for Driving Growth,” highlighting the opportunities that the RIA channel presents for fund firms. “By understanding the unique characteristics of these firms in terms of product usage, the client base they serve, and their general investment philosophies, funds can better position their products and grow assets,” adds Polefrone.
The earlier research suggests the rapid growth in the sales of these products by RIAs is reshaping the way fund firms market and distribute ETF and mutual fund products. According to insights from Access Data, RIAs now sell more, in aggregate, than the top four wirehouses. Unfortunately for fund sales and marketing executives, RIAs tend to be small and more diverse, unlike wirehouse institutions, and therefore harder to reach using traditional distribution strategies.
Gaining access and winning business in the independent space requires advanced segmentation and specific targeting of the individual adviser, according to Access Data. The research suggests RIAs with $100 million to $1 billion in assets under management have the biggest aggregate asset base of all the segments. RIAs in this segment also tend to use ETFs and mutual funds more actively.
Broadridge’s Fund Distribution Intelligence tool provides sales and asset data collection information for more than $9.3 trillion of long-term mutual fund and ETF assets across 900 distributors. More information is available at www.broadridge.com.