Investment Adviser Industry Snapshot 2023
Industry Snapshot Confirms Record Number of Advisers, Staff Supporting Sector
In the 2023 Investment Adviser Industry Snapshot, the Investment Adviser Association (IAA) and National Regulatory Services (NRS), a COMPLY company, announced that the sector grew by 2.1% in 2022, with 15,114 fiduciary investment advisers managing $114.1 trillion in assets for 61.9 million clients.
While assets under management declined for the first time since 2008 due to a vacillating economy, the investment advisory industry was resilient, with both the number of advisers and non-clerical employees climbing to a record high in 2022.
The 2023 Snapshot by the Numbers: Most Advisers are Small 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
Significant Themes in the Results
- Growing Client Base: The number of clients using asset management services increased in 2022 to a record high of 54.3 million, a gain of 2.1%. However, the total number of clients not using asset management services, such as clients using only financial planning services, declined in 2022 as digital advice offerings evolved and providers realigned their platforms. As a result, the total number of clients declined by 4.3%.
- Regulatory Uncertainty: Regulatory change looms large. Rule proposals from the Securities and Exchange Commission (SEC) have the potential to lead to significant industry change. Of note is the safeguarding proposal which would subject an additional 1/3 of the industry to custody requirements.
- Acceleration in Trend: During this period, the number of offices in private residences rose sharply. The 25.6% increase in 2022 suggests that advisers are transitioning to a permanent remote or hybrid model.
- PE over Hedge Funds: Over the past 10 years, both the number of funds and assets under management have been increasing more rapidly for private equity funds than for hedge funds. Private equity funds now account for 44.2% of the number of private funds and 32.8% of private fund assets.