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Eventually, the largest RIA aggregators could begin to see some advisors “splinter off” toward more independence out of companies that have become “a large national or international enterprise,” said David Grau, CEO of consulting firm Succession Resource Group. For now, movement into those firms and out of the wirehouses and other brokerages is feeding into the biggest RIAs, as are two other trends: teaming and companies offering advisors many essential services in one place.
“They’re able to compete on price, scale and service level. It’s really hard to compete with them, and, so, if you can’t beat ’em, join ’em,” Grau said. “The aggregation is at a really good inflection point for our industry. We’ve got large enough firms that can now focus on mentoring and training the next generation, not buying a book.”
Over the past decade, RIAs have expanded at an 11% compound annual growth rate due to asset appreciation and advisors’ gravitation toward them, research firm Cerulli Associates found in a study released earlier this month. At the same time, more than two-thirds of RIA executives with billion-dollar firms said organic growth is a strategic priority, and 83% said advisors’ lack of available time to focus on that is constraining their efforts around that goal. Regardless, the firms with at least $5 billion are vacuuming up the RIA channel. In the past five years, their client assets jumped at an average annual rate 21% and their advisor headcounts surged by 19% while their share of the channel’s assets soared by 18 percentage points.
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This article was first published by Tobias Salinger. All rights to the original content are held by FinancialPlanning.com.