Large RIAs Expand as Fee Models Become Harder to Navigate
The number of registered investment advisers managing more than $5 billion has increased sharply over five years, expanding investor choice while making differences in compensation, services and standards of care increasingly important, according to research from Cerulli Associates and Credent.
The population grew to 343 firms from 194, an increase of approximately 77%. However, firms with brokerage affiliations or insurance capabilities expanded faster than fee-only providers.
Among the large RIAs analyzed, fee-only firms’ share of assets declined to 34% from 42% in 2020, even as their numbers increased.
“Today’s investors have more access to advice than ever before, but understanding the differences between wealth management providers has become increasingly challenging,” said Brendan Powers, director at Cerulli.
The research found that 73% of investors working with a fiduciary reported satisfaction with their provider, compared with 48% working with a nonfiduciary. The association does not establish that fiduciary status alone explains satisfaction.
Understanding costs remains another challenge. Only 33% of investors understood that they paid an asset-based fee, while 15% were unsure.
Fee-only RIAs receive compensation through client advisory fees. Other business models can include brokerage commissions or insurance compensation, creating additional considerations when evaluating costs and potential conflicts.
“They should know how their advisor is paid, where potential conflicts may exist and whether that advisor is required to act as a fiduciary,” said David Hefty, CEO of Credent Wealth Management.
Service capabilities are also evolving. More than half of RIAs operate in teams, combining advisors with specialists across investments, financial planning, technology and taxes.
Leading firms are centralizing portfolio construction, expanding alternative investments and increasing use of exchange-traded funds and separately managed accounts.
Nearly seven in 10 investors consider tax reduction important when evaluating providers, reinforcing demand for tax-aware investing and planning.
“Cost matters, but value matters more,” Powers said.