The independent and hybrid registered investment advisor (RIA) channels are growing at a faster pace than other brokerage channels. To capitalize on this opportunity, asset managers are expanding their coverage models and the depth of their resources for larger RIAs, according to the latest Cerulli Edge-U.S. Advisor Edition report.
The total number of independent and hybrid RIAs has surged in the past decade, rising from 18% to over 27%, and is expected to exceed 30% within the next five years.
Advisors with varying levels of experience and assets have made the switch, but RIAs with more than $1 billion in assets under management have experienced the greatest expansion.
With this growth, asset managers are enhancing their coverage models, expanding their service menus to better cater to these massive RIAs.
Currently, more than two-thirds of asset managers offer or plan to offer dedicated key account coverage, institutional pricing, and client-facing marketing materials to the largest RIAs.
At least 75% of asset managers are using or planning to use dedicated key account coverage to aid in distribution efforts with the largest RIA firms. However, these resources are no longer sufficient compared to the more complex resources advisors now expect from the industry.
“It is no longer a competitive advantage to simply provide key account coverage or make client-facing marketing materials more user-friendly,” says Kevin Lyons, senior analyst.
Advisors are seeking more intricate resources that can truly benefit their practice by making it more efficient, he added.
As a result, distribution executives at asset managers have also begun to focus on other services: nearly 70% currently offer or plan to offer portfolio construction/model construction services or investment analysis tools.
More than half (52%) offer or plan to offer business consulting resources (e.g., succession planning, growth strategies, team structuring).
“Wave after wave of advisors is joining the independent channel, coming from firms and channels that often provided portfolio analysis tools, consulting expertise, and investment analysis as part of their advisor affiliation. Asset managers understand the need to prioritize coverage in the RIA space and help fill any gaps in research or even administrative services that their former firms provided,” says Lyons.
As more experienced advisors migrate to independent and hybrid RIA channels, asset managers can seize the opportunity by deepening their competitive positioning through the quality of the resources they offer, making themselves more attractive potential partners for advisors, concludes the expert.
