Data & Research January 22, 2025

Total Number of Advisers Has Stagnated, Cerulli Reports

While AUM continues to grow, training, mentorship and succession planning could all help address the headcount stasis.

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Retail adviser-managed assets hit $31.3 trillion in 2023, signaling continued growth. However, the total number of advisers has stagnated, with headcount increasing by just 0.2% over the last decade, according to the “Cerulli Report—U.S. Adviser Metrics 2024,” released earlier this month.

According to Cerulli Associates, the stagnation is in part due to ongoing practice consolidation, particularly among independent advisers, who have gained the most market share by assets. Independent RIAs have seen their share rise to 16% from 12% over the past 10 years.

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To address the shift toward independents, broker/dealers must offer their advisers greater flexibility and technology, Cerulli recommended.

“However, 68% of all advisers [cite] the lack of time to implement and learn their firm’s technology as a moderate or major challenge in their practice,” according to a response from the Cerulli analyst team. “With that being said, any additional support and training brokers/dealers can provide to their advisers to help alleviate this challenge will be highly beneficial to all advisers. Broker/dealers must recognize that having competitive technology is a continuous investment and not a one-time solution.”

Adviser practices with at least $500 million or more in assets under management now control 67% of the industry’s total AUM, and half of these practices are considering acquisitions. Mergers and acquisitions continue to drive growth, with 48% of advisers working in teams.

While advisers in the wirehouse channel manage more than one-third of industry assets, that segment is losing advisers at the fastest rate in the industry. Over the next five years, wirehouse market share is projected to decline to 14% from 15%, largely due to gains made by the registered investment advisory sector.

Client Relationships

Overall, client satisfaction with advisers remains high. Cerulli found that 80% of clients expressed contentment with their advisers, primarily due to trustworthiness and the quality of service. Referrals from clients, friends and family constitute the largest driver of advisers’ new-client acquisition. Advisers differentiate themselves by offering unique investment strategies and comprehensive financial planning, though service offerings vary by channel and practice size.

Referrals remain a key growth tool for advisers, the report noted. More than half (55%) of new clients come from referrals, while 13% are referred by other professionals that serve as centers of influence, such as accountants or attorneys. Advisers typically offer an average of 7.1 different services, with wirehouse advisers leading the industry by offering 8.3 services, including advanced planning for high-net-worth clients.

The report also found that financial planning services are increasingly valued by investors, reflecting a broader trend toward more holistic advisory services. Currently, 48% of advisers offer comprehensive financial planning, with this figure expected to rise to 55% by 2026. Conversely, the proportion of clients receiving no planning services is set to decrease to 23% in 2026 from 30% in 2024.

Succession

Cerulli found succession planning is a growing concern among advisers in all channels. More than one-third of advisers (37%) reported expecting to retire or reduce their business involvement in the next 10 years, underscoring the need for strong succession planning and the recruitment of new talent.

However, 26% of advisers with less than 10 years until retirement remain uncertain about their succession plans. This trend is juxtaposed against data that found up to 71% of rookie advisers fail within their first five years in the business. Taken together, the data highlight the need for stronger training programs and mentorship to ensure the industry’s long-term success.

“We also asked rookie advisers about their level of satisfaction with firm support on some … training opportunities,” the Cerulli analyst team stated. “55% are very satisfied with their firm’s support in training on financial planning topics; 48% are very satisfied with their firm’s support in training on sales techniques; 50% are very satisfied with their firm’s support in training on investment analysis. Given that only about half of all advisers across all channels are very satisfied in the areas listed above, these should be a key focus for broker/dealers to continue to dedicate additional resources.”

Products January 22, 2025

TIAA and Nuveen’s Target-Date Annuity Strategies Reach 1 Million Accounts

The news comes after BlackRock's announcement last week that its annuity-integrated TDF product has surpassed $16 billion in assets under management.

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TIAA and Nuveen’s target-date lifetime income strategies, across the companies’ corporate, educational, governmental and health care retirement plan businesses, have surpassed $50 billion in assets under management and have reached 1 million accounts, according to the firm’s announcement on Wednesday.

The number of accounts doubled in less than a year, and more than 600 employers are currently offering TIAA and Nuveen’s lifetime income-embedded target-date fund strategies.

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TIAA’s RetirePlus program—the default in-plan retirement income option—was launched in 2014, and Nuveen Lifecycle Income, an off-the-shelf target-date collective investment trust series with the TIAA Secure Income Account embedded into it, was launched in 2023.

Hybrid TDFs that include annuities have gained popularity among plan sponsors looking to offer a form of guaranteed retirement income within their defined contribution plans. Last week, BlackRock announced that LifePath Paycheck, the firm’s hybrid annuity TDF offering, has accumulated $16 billion in assets under management since its launch in April 2024.

Brendan McCarthy, head of retirement investing at Nuveen, attributes the growth of hybrid annuity TDF products to employers’ and participants’ increased comfort with TDFs as default investments.

“Employers … might find offering an individual annuity or anything that’s self-selected a little bit complex for a 401(k) plan,” McCarthy says. “We know participants generally don’t self-select and manage their own 401(k) plan. They like the employer to do it for them via that default fund or target-date fund.”

McCarthy says employers seem increasingly comfortable with embedding the option of guaranteed income into their default TDF, enabling a participant to convert a portion of his assets into income that he cannot outlive during his retirement.

Regarding both TIAA’s RetirePlus program and Nuveen’s Lifecycle Income Index CIT series, McCarthy says, when a participant reaches retirement, he may choose to annuitize a portion of his savings. TIAA also has a call center, and the representatives can counsel people through the annuitization decisionmaking process.

McCarthy argues that a benefit of the Nuveen Lifecycle Income product is that it offers both a TDF and annuity from the same firm. While Nuveen combines the TDF and annuity into one offering, it also allows them to be purchased separately.

McCarthy says participants using these products may decide to annuitize their assets at any point approaching retirement, at retirement or after they retire. The time at which a retirement plan participant is alerted about his option to annuitize could vary, depending on the recordkeeper and employer, McCarthy says.

“We’ve seen massive growth in annuity target-date funds over the past few years, and seven of the top nine target-date fund companies have [introduced] some form of an annuity target-date product into the market,” McCarthy notes. “In fact, we’re forecasting that the majority of target-date funds over the next 10 years will be annuity target-date funds.”

Other firms that offer hybrid annuity TDFs include Capital Group, home of American Funds, Principal Financial Group and State Street Global Advisors.

Vanguard research from last June recommended that plan sponsors consider several factors when evaluating whether to offer a hybrid annuity TDF. For example, an annuity component may not be optimal for everyone in the plan, and the appropriate type of annuity, timing and amount of the annuity are likely to vary significantly across all participants. Vanguard suggested that plan sponsors include a few personalization options for more engaged participants so each can tailor the annuity product to meet individual needs.

Portability could also be a concern with regard to these products, as annuity benefits can be harder to transfer to a different plan or recordkeeper than are traditional fund investments.

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