To capitalize on the trend of independent and hybrid RIA channels growing at a faster rate than other intermediary channels, asset managers are expanding their coverage model and depth of resources to the largest RIAs, research firm Cerulli Associates said Tuesday.
The independent and hybrid RIA channels have grown significantly over the past decade and are expected to continue growing over the next five years, according to Cerulli.
The combined advisor headcount marketshare for the independent and hybrid RIA channels among all advisor channels increased from 18% in 2012 to more than 27% in 2022 and is expected to surpass 30% by the end of 2027, Cerulli predicted.
However, the largest RIAs – those with over $1 billion in assets under management (AUM) – have seen the largest expansion, Cerulli said.
As a result of that development, asset managers are enhancing their coverage models, expanding their menu of services to better suit those huge RIAs, according to Cerulli.
Over 66% of asset managers offer or plan to offer dedicated key account coverage, institutional pricing and client-facing marketing materials to the largest RIAs, Cerulli pointed out.
At least 75% of asset managers use or plan to use dedicated key account coverage to help distribution efforts with the largest RIA firms, Cerulli said.
But those types of resources are no longer sufficient when compared to the more complex resources that Cerulli said advisors now have come to expect in the industry.
The data cited was among the findings included by Cerulli in The Cerulli Edge—U.S. Advisor Edition, 3Q 2024 Issue.
“It is no longer a competitive advantage to provide only key account coverage or make more client-friendly marketing material available,” according to Kevin Lyons, Senior Analyst at Cerulli.
“Advisors are in search of more intricate resources that truly can benefit their practice by making it more efficient,” he said.
As a result, distribution executives at asset managers also started to focus on other services. Almost 70% already offer or plan to offer portfolio construction services, model construction services or investment analysis tools, Cerulli said. Fifty-two percent of them offer or plan to offer business consulting resources such as succession planning, growth strategies and team structuring, the firm noted.
Lyons continued: “Waves of advisors are joining the independent channel, coming from firms and channels that often provided portfolio analytics tools, consulting expertise, and investment analysis as part of the advisor’s affiliation. Asset managers understand the need to prioritize coverage in the RIA space and help fill in any gaps in research-related or even administrative services offered by their previous firms.”
He added: “As more seasoned advisors migrate to the independent and hybrid RIA channels, asset managers can capitalize on the opportunity by increasing the depth of their competitive positioning with the quality of the resources they provide and become more appealing potential partners to advisors.”
Jeff Berman, Contributing Editor & Reporter at Wealth Solutions Report, can be reached at jberman@wealthsolutionsreport.com.
