The Independent RIA Industry: The Objective Alternative

May 20, 2004

Abstract

Boston, MA, USA May 20, 2004

Celent predicts that client assets managed by independent RIAs will grow by 10 percent a year through 2007.

Independent registered investment advisors (RIAs) have long been a quiet presence in the retail advisory business in the U.S. In recent years, though, they have generated increasing publicity, and custodians have been clamoring to serve them. These developments are hardly surprising: affluent individuals have increasingly been seeking the services of independent RIAs. Independent RIAs accounted for 9 percent of the U.S. private client market in 2003, up from 7 percent in 2001, and Celent expects them to account for 14 percent by 2007. In a new report, The Independent RIA Industry: Poised for Substantial Growth, Celent examines the driving forces of the market and the factors that could possibly hinder its growth.

The industry痴 growth has been fueled by a number of factors. During the market downturn, investors of all stripes lost not only much of their money but also faith in those serving them. "Consequently, many of those whose portfolios were hard hit sought not only professional advice but also independent advice, something advisors affiliated with large financial institutions are viewed by many容specially investors whose net worth exceeds US$1 million預s having difficulty giving," says Adam Josephson, analyst in the securities and investments group at Celent and author of the report.

Other factors warrant mention as well. Investors have been drawn to the fee structures that RIAs favor. As the baby boomers begin to contemplate retirement they face critical decisions and are increasingly seeking the help of qualified professionals. U.S. workers are rolling over billions of dollars of retirement plan assets, a significant portion of which are ending up in the hands of independent RIAs. And a number of successful advisors at large brokerage firms either have left those firms to start their own firms or are contemplating doing so.

The industry is not without its concerns. Large brokerage firms have largely adopted a fee-based business model and are encouraging advisors to better educate themselves in an attempt to position themselves as wealth managers rather than stock jockeys. The costs of complying with existing and forthcoming federal regulations could multiply in the years to come. And brokerage firms and others will likely benefit from the market痴 upward momentum, as is often the case. That said, none of these factors will be significant enough to hinder the industry痴 growth, which promises to be substantial for several years to come.

A

Table of contents is available online.

of Celent Communications' Retail Securities & Investments research service can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.

        

Send mail to info@celent.com with questions or comments about this Web site.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

 

Boston, MA, USA May 20, 2004

The Independent RIA Industry

Return to report Abstract

 

EXECUTIVE SUMMARY 3
MARKET OVERVIEW 5
  Who Are Independent RIAs? 5
  Market Volumes 6
  Business is Brisk, But Why? 9
  The Maturing M&A Market 15
  Shift to Retainer Fees 18
  The Threat From Large Brokerage Firms 20
OPERATIONS AND TECHNOLOGY 24
  The Custodian Marketplace 24
  The Technology Marketplace  26
  PMS 27
  Portfolio Analytics Tools 27
  Asset Allocation Software 28
  Financial Planning Software 29
  CRM Software 29
  Aggregation Software 29
  Web Sites 30
  Total IT Spending 30
REGULATORY ISSUES 32
CONCLUSION 34
OBJECTIVITY & METHODOLOGY 36

Sign in to download reports and access personalized information