Investment Advisors Who Go It Alone Face Added Risks

Going it alone in the complex, fast-moving world of investment management may leave registered investment advisors feeling stranded, without access to tools required to expand, according to a recent survey from Cerulli Associates. 

“RIAs often grow in a vacuum,” Cerulli senior analyst Stephen Caruso said in a statement. “The independent nature of the channel limits opportunities to collaborate with other firms and work through shared problems.” 
Some 40% of RIAs have found relief and value from wholesalers who offer them best practice tips, such as how to handle intergenerational wealth transfer, effectively prospect for new clients and deal with regulations, noted Cerulli. 

The firm’s research also found that some of the operational components of running a business are the most challenging for the channels. An RIA must keep up with compliance responsibilities and filings as well as devote the time necessary to run a business, both of which 23% of advisors said are major challenges.  

Added to those regulatory requirements RIAs must handle tasks that are unique to channels, which can be a major time draw for advisors.  

RIAs Working With Asset Managers Perform Better 

Cerulli believes the outcome could have been much more lucrative for RIAs in 2021 if asset managers had taken a more proactive role in working with RIAs. It was then that RIAs with more than $5 billion in assets under management grew at a 24.7% five-year compound annual growth rate compared to the overall channel performance of 14.8%, a 10 –percentage point differential, according to the firm. 

“This contrast in growth becomes increasingly apparent when considering that firms sized between $100 million and $250 million have grown at a 3% five-year CAGR,” noted Cerulli.  

The company added that, at this smaller scale, trying to grow assets underlines both the competition and challenges RIAs face as they juggle the elements of the dynamic, complicated advice market. 

“RIAs looking to broaden their approach and find success in other areas will need to ensure they are taking advantage of opportunities afforded to them by strategic partners,” Cerulli said. “By tapping into an external resource, RIAs can adapt to changing dynamics and set themselves up for long-term success.” 

 
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