RIAs Are Putting Wirehouses to Shame

This is probably no surprise to anybody, but RIAs have gotten ravenous, more so than the wirehouses.

RIABiz reports that in the first quarter of 2014, RIAs had $364 billion of ETF AUM, surpassing the top four wirehouses’ total of $311 billion, according to Access Data, an arm of Broadridge.

Guest columnist Frank Polefrone also noted that in total, the RIA channel for ETFs and long-term mutual funds was $1.67 trillion at the end of the first quarter, surpassing the total garnered by the top four wirehouses: Merrill Lynch & Co., Morgan Stanley, Wells Fargo and UBS.

Of course, this asset blast, Polefrone argues, is going to have continuing ripples in the distributions world, confirming what most of you have been worrying over for a while, in particular centralization.

Here is an important paragraph from his excellent analysis:

While it is encouraging that a broader base of advisors is using ETFs, the RIA channel provides some significant challenges. The four main wirehouses offer a more centralized points of contact for their approximately 57,000 advisors, while the RIA channel is more diverse with a similar number of advisors spread among its 14,000 larger firms. For example, small RIAs with less than $100 million in assets under advisement represent about 50% of all RIA firms. Medium-sized RIAs, with $100 million to $1 billion, represent 36% of all RIA firms. Large RIAs, with $1 billion to $2.5 billion in assets, represent only 5%.

Poloefrone offers three useful tips on the subject: first, understand the relationships between RIAs and their custodians; second, providers should determine how a particular RIA operates so they can offer the right products, and three, firms need to calibrate their sales resources to the right opportunities. 

Edited by: Tommy Fernandez


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