In a report that confirms what most investment advisors have been talking about: The numbers of registered investment advisors are up, but their assets under management are down.

The Investment Adviser Association (IAA) and National Regulatory Services (NRS) released their annual report, Evolution/Revolution, this morning, showing that the total number of SEC-registered investment advisors grew 2%, to 11,257. However, the total assets under management dropped to $34 trillion after reaching $42.3 trillion in 2008—a total loss of $8.3 trillion, or 20%.

Smaller firms with fewer than 50 employees comprise 90% of the RIA universe and was the only category whose numbers increased. That category rose by 38% to 6,608 this year from 4,791 in 2008. But these firms, with less than $1000 million in assets under management, control less than 20% of assets under management, according to the report.  

Asked to why the number of smaller firms jumped, David Tittsworth, executive director of the Investment Adviser Association (IAA), said there were two reasons. First, assets fell across the board, and firms that were once considered larger or medium-sized dropped into the smaller firm category. “Obviously this year some of the change is because assets just fell for everybody—so larger advisors fell into the smaller categories,” Tittsworth says.
Second, he notes of the new RIAs:“I don’t have data to prove it but I suspect that some must be attributable to breakaway brokers. Every number in the report is from ADV amendment files, and they don’t ask, ‘were you a broker before?’”
 
As for assets under management, this year, more than 8,000 investment advisers reported managing between $25 million and $1 billion in assets (71% of all SEC-registered investment advisors), according to the report. Of these, more than 4,200, or 38%, reported managing between $25 million and $100 million in assets.  

The data in the report was captured April 10 and comes from the SEC Form ADV amendments every registered advisor must file annually, within 90 days of the end of the fiscal year. Approximately 90% of advisors use the calendar year as their fiscal year, and have to file their update by March 31. “We figure April 10 should give us the freshest data,” Tittsworth says.

This means, however, that most the report’s data was gathered at or near the market low, and may paint a darker picture of the RIA market than exists today. “If we got the download of the disc today, I’m sure the AUM would be significantly higher than this report reflects,” Tittwsorth observes. “Every day, the AUM of the 11,257 advisors is going to fluctuate. This snapshot was probably close to the bottom of the cycle.”