In late June, COMPLY and the Investment Adviser Association (IAA) published their 2023 IA Snapshot report, a review of the industry and the evolution which has occurred over the last 12 months. In the 2023 report, the co-publishers noted the emergence of several key trends, which have (and will continue) to impact registered investment advisers.
In this blog, we will highlight the top three takeaways noted within the report, providing insight into the impact of the last year, as well as foresight for what is to come.
A review of the registered investment adviser industry
The registered investment adviser industry is made up of large and small firms alike, however, the 2023 report found that the majority of firms were in fact small(er) businesses.
- 91.7% of advisers employed 100 or fewer employees
- 70.2% of advisers managed less than $1 billion in assets, and 88.5% managed less than $5 billion
- Smaller advisers accounted for a high proportion of employees relative to their assets managed
- Advisers focused on individuals as clients were likely to be small, with an average of just 9 employees, 2
- offices, and $330 million in assets under management
- Advisers with less than $1 billion in assets accounted for almost all of the new SEC registrations, with new
- registrants accounting for 10.0% of firms in this size range
2023 IA Snapshot: Top takeaways for registered investment advisers
While one could argue we saw an influx of trends and hot topics these last 12 months – cryptocurrency, cybersecurity, AI/ChatGPT, just to name a few – these three highlights provide context for the evolution of the industry and the growth of new opportunities and challenges.
The industry was resilient in a difficult environment.
Not surprisingly given the market conditions, assets under management declined by 11.1% in 2022, the first decline since 2008. However, the number of advisers climbed to a record high during the year, as did the number of non-clerical employees.
Individual investors are increasingly seeing the value of the fiduciary advice offered by investment advisers.
Investors are increasingly engaging investment advisers, which continuously provide investment management advice as fiduciaries, putting their clients’ interests ahead of their own. Over the past 5 years, over 22 million more individuals have engaged an investment adviser for asset management – a rate of growth in both the number of individual clients and assets of roughly 12% per year.
Regulatory change looms large.
Rule proposals from the SEC have the potential to lead to significant industry change. We highlight some of the many recent proposals that would, if implemented, have an impact on the data in this report. Perhaps most noteworthy is the safeguarding proposal, which would subject over 5,000 additional advisers – more than one-third of the industry – to custody requirements.
Take a deeper dive into the IA Snapshot industry analysis by downloading the full report.