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Registered investment advisers (RIAs) are preparing to thrive in the post-COVID economy. What actions might an RIA take to gain a greater share of the market?

September 2, 2020

An article by Sean Collins, research manager, Deloitte Services LP

As firms begin developing their 2021 strategic and operational plans, it is hard to believe that just a few months ago, planning for the future may have seemed like an exercise in futility. However, planning for the future is exactly what investment professionals do, and it should come as no surprise that many registered investment advisers (RIAs) are indeed preparing to thrive in the post-covid economy. A survey conducted in March and April found that almost 90% of advisors expect assets from new clients will be the primary factor in driving a 7% increase in their assets under management (AUM) over the next 12 months.1 While the continuation of the equity bull market is unknown, undoubtedly some registered investment advisers (RIAs) are likely to find greater success than others in attracting these clients and assets. So, what actions might an RIA take to gain a greater share?

New data analysis on AUM growth

To answer this question, we analyzed thousands of Form ADVs filed with the SEC and identified characteristics of those RIAs that experienced the highest AUM growth over the past four years. Our analysis focuses on the types of products and clients targeted by RIAs during this period, rather than on investment prowess or macro-economic conditions. This population consists of over 9,000 RIAs that were active between 2016 and 2020 (figure 1).2 We used a log scale to identify the distribution of AUM within the population and found three distinct groups. The analysis shows that the change in AUM between firms is steepest in the “Small” RIA segment and then flattens until reaching about $1 billion in size, when the AUM change steepens again. It may not be surprising that most RIAs today fall in the “Medium” size segment. Unfortunately, the average RIA in this “Medium” segment group experienced just a 1% compound annual growth rate (CAGR) in AUM from 2016-2020 compared with 10% CAGR for the “Large” segment and -14% for the “Small” segment. We then contrasted the business models between the “Medium” and “Large” segments along products, customers, and their employees to get a sense of the differences in each of these attributes on either side of the growth inflection point of $1 billion.