fa ’ s 2022 ria survey and ranking
does your firm have an outside institutional investor ?
But now the industry has uptown problems : The new private equity owners haven ’ t just bought assets . They ’ ve bought relationships . The distorted image of PE pirates looting and cutting costs to slim a firm down for a sale in five years doesn ’ t make sense here , industry watchers say . DeVoe says that the image cultivated by executives like “ Chainsaw Al ” Dunlap at industrial companies does not and cannot apply .
“ Many of us have read Barbarians at the Gate and we ’ ve seen Chainsaw Al , and that approach is to buy , potentially lever up , cut expenses and then flip the organization ,” says DeVoe . “ We haven ’ t really
■ Yes 15.17 %
■ No 84.83 %
ServiceS Offered
cATeGORy
% OF FIRMS THAT OFFeR THIS SeRVIce In-HOuSe
% OF FIRMS THAT OuTSOuRce THIS SeRVIce
AVG . % OF cLIenTS uSInG SeRVIce WHen OFFeReD
Financial Planning |
97.00 % |
1.50 % |
70.66 % |
Alternative Investing |
53.56 % |
10.30 % |
39.05 % |
Asset Allocation |
95.51 % |
0.94 % |
95.92 % |
Bond Management |
64.61 % |
14.42 % |
56.41 % |
Business Consulting |
35.77 % |
6.55 % |
13.29 % |
Charitable Counseling |
76.03 % |
4.68 % |
32.88 % |
Digital Advice Platform |
16.67 % |
3.75 % |
26.39 % |
Equity Management |
70.79 % |
7.49 % |
76.38 % |
Estate Planning |
62.92 % |
18.16 % |
57.66 % |
Exchange-Traded Funds |
81.27 % |
6.18 % |
77.41 % |
Fund Of Hedge Fund Selection / Oversight |
22.85 % |
5.24 % |
21.02 % |
Group 401 ( k ) Advice / Sales |
52.06 % |
5.43 % |
13.48 % |
Health Care |
20.22 % |
11.99 % |
25.50 % |
Hedge Fund Selection / Oversight |
25.84 % |
5.81 % |
21.89 % |
Impact Investing * |
61.24 % |
6.55 % |
18.24 % |
Index Funds |
70.41 % |
5.99 % |
73.15 % |
Institutional Fund Management |
36.14 % |
3.56 % |
40.55 % |
Insurance Planning |
65.54 % |
11.42 % |
46.81 % |
Manager Selection / Oversight |
56.74 % |
2.62 % |
72.41 % |
Mutual Fund Selection / Oversight |
81.65 % |
2.81 % |
83.29 % |
Real Estate Investment Trusts |
48.31 % |
8.80 % |
44.45 % |
Separately Managed Account |
53.00 % |
11.24 % |
38.70 % |
Tax Planning |
72.47 % |
10.67 % |
69.36 % |
Tax Preparation |
23.03 % |
17.98 % |
35.82 % |
* Category included socially responsible and sustainable investing . if YeS , what percentage of the firm do they own ?
■ 0-20 % 16.05 %
■ 20 % -40% 18.52 %
■ 40 % -60% 19.75 %
■ More than 60 % 45.68 % seen any of that in this industry for good reason .” Typically it happens in more challenged industries where the growth has stalled , he says . “ And this industry is vibrant . … This industry should frankly be growing faster than it is on a true organic basis .”
Most institutional investors are learning that the value of RIAs can vary widely depending on the characteristics of individual firms and their clients . Firms with younger client bases and advisors in affluent regional markets tend to have much greater growth potential , and receive higher valuations , than those with older advisors and mature clients in areas with stagnant wealth creation .
The number of RIAs is certainly growing . Fidelity ’ s Slater says “ concentration ” is a better term than “ consolidation ” for RIAs since the barriers to entry remain low and the RIA space is getting crowded with new entrants all the time . McKinsey & Co . said in a report on its website in August 2021 , “ More than 2,000 of today ’ s 6,000 retail-focused RIAs were created since 2016 , and about 700 new RIAs are started each year .”
People have imagined a time when the RIA space ’ s top players will resemble accounting ’ s Big 4 . But Slater says that time appears to be fairly far off given all the new entrants .
Meanwhile , as more broker-dealers get into the fee-only act , according to Cerulli Associates , RIAs have been forced to respond by adding services .
It ’ s not something that bothers Eric Kittner , the CEO of Moneta in St . Louis . “ We don ’ t see a whole lot of competition on the hybrid side .” However , he says , there ’ s general competition from all parts of the RIA space . “ I don ’ t see fee compression as a problem . Where we ’ ve seen it is ‘ service creep .’ That is , you ’ re doing more for your clients than you anticipated 10 or 15 years ago . Yet you haven ’ t necessarily adjusted the fee schedule .”
But there ’ s a certain bedrock of pricing power , he says . Clients who want to delegate their financial directives to somebody else are generally willing to pay for it and aren ’ t as sensitive about the prices they are paying , he says , any more than customers turn up their noses at more expensive coffee from Starbucks .
Big fish
Slater says it ’ s increasingly a large group of consolidators doing most of the M & A deals . “ We look at firms that have done three or more deals in a 12-month period and there are 20 firms within that group right now which are driving most of the deals ,” he says . “ But you ’ re talking about some very different business models and approaches , and I think that
Continued on page 52
40 | financial advisor magazine | July / august 2022 www . fa-mag . com