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[\/et_pb_text][et_pb_button button_url=”https:\/\/ics-compliance.com\/wp-content\/uploads\/08\/ia-6383-fact-sheet.pdf” url_new_window=”on” button_text=”Download The Fact-Sheet” button_alignment=”left” disabled_on=”on|on|on” admin_label=”Button Fact Sheet Download” _builder_version=”4.22.2″ custom_button=”on” button_text_size=”13px” button_text_color=”#ffffff” button_bg_color=”#006daf” button_border_width=”0px” button_border_radius=”0px” button_icon=”%%20%%” button_icon_color=”#ffffff” vertical_offset_tablet=”0″ horizontal_offset_tablet=”0″ z_index_tablet=”0″ button_text_shadow_horizontal_length_tablet=”0px” button_text_shadow_vertical_length_tablet=”0px” button_text_shadow_blur_strength_tablet=”1px” box_shadow_horizontal_tablet=”0px” box_shadow_vertical_tablet=”0px” box_shadow_blur_tablet=”40px” box_shadow_spread_tablet=”0px” disabled=”on” global_colors_info=”{}”][\/et_pb_button][et_pb_text admin_label=” Text Post” _builder_version=”4.27.3″ text_font=”DM Serif Display||||||||” text_text_color=”#9c9c9c” header_2_font=”DM Serif Display||||||||” header_2_text_color=”#293d93″ header_2_font_size=”50px” header_3_font=”DM Serif Display||||||||” header_3_text_color=”#02c39a” header_3_font_size=”19px” vertical_offset_tablet=”0″ horizontal_offset_tablet=”0″ z_index_tablet=”0″ text_text_shadow_horizontal_length_tablet=”0px” text_text_shadow_vertical_length_tablet=”0px” text_text_shadow_blur_strength_tablet=”1px” link_text_shadow_horizontal_length_tablet=”0px” link_text_shadow_vertical_length_tablet=”0px” link_text_shadow_blur_strength_tablet=”1px” ul_text_shadow_horizontal_length_tablet=”0px” ul_text_shadow_vertical_length_tablet=”0px” ul_text_shadow_blur_strength_tablet=”1px” ol_text_shadow_horizontal_length_tablet=”0px” ol_text_shadow_vertical_length_tablet=”0px” ol_text_shadow_blur_strength_tablet=”1px” quote_text_shadow_horizontal_length_tablet=”0px” quote_text_shadow_vertical_length_tablet=”0px” quote_text_shadow_blur_strength_tablet=”1px” header_text_shadow_horizontal_length_tablet=”0px” header_text_shadow_vertical_length_tablet=”0px” header_text_shadow_blur_strength_tablet=”1px” header_2_text_shadow_horizontal_length_tablet=”0px” header_2_text_shadow_vertical_length_tablet=”0px” header_2_text_shadow_blur_strength_tablet=”1px” header_3_text_shadow_horizontal_length_tablet=”0px” header_3_text_shadow_vertical_length_tablet=”0px” header_3_text_shadow_blur_strength_tablet=”1px” header_4_text_shadow_horizontal_length_tablet=”0px” header_4_text_shadow_vertical_length_tablet=”0px” header_4_text_shadow_blur_strength_tablet=”1px” header_5_text_shadow_horizontal_length_tablet=”0px” header_5_text_shadow_vertical_length_tablet=”0px” header_5_text_shadow_blur_strength_tablet=”1px” header_6_text_shadow_horizontal_length_tablet=”0px” header_6_text_shadow_vertical_length_tablet=”0px” header_6_text_shadow_blur_strength_tablet=”1px” box_shadow_horizontal_tablet=”0px” box_shadow_vertical_tablet=”0px” box_shadow_blur_tablet=”40px” box_shadow_spread_tablet=”0px” global_colors_info=”{}”]<\/p>\n
Consolidators of registered investment advisory firms are reshaping a once fragmented channel, Boston-based consulting firm Cerulli Associates underscored on Wednesday.\u00a0<\/p>\n
Roll-up firms and others who are buying up independent RIAs have grown assets 31% year-over-year and account for $1.5 trillion, or 18%, of the channel\u2019s total assets under management, according to Cerulli. That AUM rivals firms like Raymond James Financial\u2019s Private Client Group, which managed $1.57 trillion at the end of the third quarter.\u00a0<\/p>\n
Meanwhile, RIA consolidators\u2019 share of industry assets has grown by 10 percentage points over the past decade, the research firm said.\u00a0<\/p>\n
\u201cThis market opportunity has shifted the dynamics for strategic partners, asset managers, and, most notably, RIAs themselves,\u201d according to the report.\u00a0\u00a0<\/p>\n
Around 14% of advisors in the RIA channel are affiliated with a consolidator, up six percentage points over the last five years, Cerulli said.\u00a0<\/p>\n
\u201cRIA consolidators have been able to maximize this growth period by building platforms that cater to advisors\u2019 needs while driving the goals of a larger, integrated organization forward,\u201d the Cerulli researchers concluded.\u00a0<\/p>\n
Some of the RIA investors or roll-ups evaluated by Cerulli for the report are: Creative Planning, Hightower Advisors, Focus Financial Partners, Mercer Advisors and Dynasty Financial Partners.\u00a0<\/p>\n
Around 55% of the RIA advisors surveyed as part of Cerulli\u2019s polling of 2,000 advisors said that they were driven to find a larger partner because those consolidators already had all of the technology in place, integrated and available at a cheaper price, the firm said.\u00a0<\/p>\n
\u201cFundamental to RIAs\u2019 needs, technology tools have become a costly and complex component of advisory practices,\u201d Stephen Caruso, a Cerulli associate director and one of the report\u2019s authors, said in a statement.<\/p>\n
Succession concerns also drive many advisors in the RIA channel to pursue consolidator options. \u201cHaving a succession plan in place is becoming ever more important as RIAs achieve scale and become more productive,\u201d according to the report, which forecasts that 37% of the RIA channels\u2019 advisors, or 31,000, will retire within 10 years, putting 35% of the channels\u2019 AUM, or $3 trillion, up for grabs.\u00a0<\/p>\n
Unlike brokers at large wealth management firms, RIAs do not have clear succession programs. More than a quarter of advisors surveyed are \u201cunsure\u201d of their plans for retirement. Almost three quarters said that they would consider succession planning or an exit strategy as a factor influencing their decision to join an aggregator.\u00a0<\/p>\n
Industry consolidation is showing up in other ways. Large firms, which Cerulli designates as having more than $5 billion in assets, have experienced the most growth, up by 44 firms year-over-year to 274 at year-end 2023, according to Cerullit. The five-year cumulative average growth rate of those firms is more than 15%, Cerulli said.<\/p>\n
As those bigger firms get bigger, the smaller RIAs appear to be losing share. RIAs with under $250 million in client assets have been decreasing in headcount over the past five years, the report said.<\/p>\n
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header_4_text_shadow_horizontal_length=\"header_4_text_shadow_style,%91object Object%93\" header_4_text_shadow_horizontal_length_tablet=\"0px\" header_4_text_shadow_vertical_length=\"header_4_text_shadow_style,%91object Object%93\" header_4_text_shadow_vertical_length_tablet=\"0px\" header_4_text_shadow_blur_strength=\"header_4_text_shadow_style,%91object Object%93\" header_4_text_shadow_blur_strength_tablet=\"1px\" header_5_text_shadow_horizontal_length=\"header_5_text_shadow_style,%91object Object%93\" header_5_text_shadow_horizontal_length_tablet=\"0px\" header_5_text_shadow_vertical_length=\"header_5_text_shadow_style,%91object Object%93\" header_5_text_shadow_vertical_length_tablet=\"0px\" header_5_text_shadow_blur_strength=\"header_5_text_shadow_style,%91object Object%93\" header_5_text_shadow_blur_strength_tablet=\"1px\" header_6_text_shadow_horizontal_length=\"header_6_text_shadow_style,%91object Object%93\" header_6_text_shadow_horizontal_length_tablet=\"0px\" header_6_text_shadow_vertical_length=\"header_6_text_shadow_style,%91object Object%93\" header_6_text_shadow_vertical_length_tablet=\"0px\" header_6_text_shadow_blur_strength=\"header_6_text_shadow_style,%91object Object%93\" header_6_text_shadow_blur_strength_tablet=\"1px\" box_shadow_horizontal_tablet=\"0px\" box_shadow_vertical_tablet=\"0px\" box_shadow_blur_tablet=\"40px\" box_shadow_spread_tablet=\"0px\" vertical_offset_tablet=\"0\" horizontal_offset_tablet=\"0\" z_index_tablet=\"0\"]<\/p> Reg BI compliance and the use of crypto assets are other areas of focus for the upcoming year.<\/p> In addition to a\u00a0previously reported SEC sweep<\/a>\u00a0looking into how firms use AI-based tools, it\u2019s the latest indication of an ever-increasing focus by the commission on registrants\u2019 use of AI in their daily practices. It\u2019s all the more notable, considering artificial intelligence was barely mentioned in\u00a0last year\u2019s exam priorities<\/a>\u00a0and wasn\u2019t cited\u00a0in the 2023 release<\/a>.<\/p> According to the SEC, the exam division will review registrants \u201cregarding their AI capabilities or AI use for accuracy\u201d and determine whether they\u2019ve put adequate policies and procedures in place to supervise the use of AI, including for tasks related to fraud prevention and detection, back-office operations, anti-money laundering processes and trading functions.<\/p> \u201cIn addition, the division will examine how registrants protect against the loss or misuse of client records and information that may occur from the use of third-party AI models and tools,\u201d the priorities document read.<\/p> According to the compliance services provider ACA Group<\/a>, the SEC\u2019s AI sweep included requests for information on how firms managed AI-related conflicts of interest, marketing materials mentioning AI, continuity plans around AI system failures and other related documents.\u00a0<\/p> This focus comes\u00a0despite a recent ACA Group survey<\/a> indicating that 64% of advisory firms had no plans to build or use client-facing AI tools or predictive analytics models in the future (compared to 30% of firms who said they\u2019re not currently doing so but are \u201cexploring or actively building\u201d such tools).\u00a0<\/p> Though AI was mentioned in the 2024 priorities, it\u2019s far more prominent this year, according to Lori Weston, director of product and strategy at STP Investment Services. Firms should be particularly vigilant, considering regulators are bringing enforcement actions against\u00a0registrants for AI-related lapses<\/a>.\u00a0<\/p> Weston also said the SEC\u2019s \u201cincreased focus\u201d on outsourcing, particularly for advisors related to investment selection and management.<\/p> \u201cAdvisers should review their overall policies regarding the supervision and oversight of all third-party providers, with a particular focus on the third-party provider\u2019s use of AI,\u201d she said. \u201cIn today\u2019s interconnected environment, AI risks can infiltrate a firm\u2019s operations via third-party vendors.\u201d<\/p> The commission has been weighing rules related to broker\/dealer and RIA conflicts using predictive data analytics, AI and machine learning. However, according to regulatory information at the White House Office of Management and Budget, the commission is considering\u00a0re-proposing those rules<\/a>, pushing back their final stages even further.<\/p> As in previous years, examiners continue to watch investment advisors\u2019 adherence to fiduciary duties and b\/d\u2019s compliance with Regulation Best Interest. They\u2019ll focus on advisors\u2019 recommendations related to high-cost products, unconventional instruments, illiquid and difficult-to-value assets and those assets sensitive to higher interest rates and changing marketing conditions, including commercial real estate.\u00a0<\/p> For dual registrants, examiners are investigating account allocation and selection practices (including differentiating between brokerage and advisory, including when rolling over to an IRA), according to the exam priorities.\u00a0<\/p> Like last year\u2019s priorities, examiners are\u00a0investigating registrants\u2019 use of crypto assets. Climate and ESG-related concerns are not mentioned in the priorities for the second year\u00a0after being focal points<\/a>\u00a0for several prior years.<\/p>AI Usage Top Priority for SEC Examiners in 2025<\/h1>
Examiners at the Securities and Exchange Commission\u00a0are investigating advisors\u2019 integration of artificial intelligence\u00a0into their operations, including portfolio management, trading, marketing and compliance.\u00a0<\/h4>
According to the SEC Exam Division\u2019s 2025 Priorities, released Monday, examiners may examine firms\u2019 \u201ccompliance policies and procedures\u201d regarding AI-related services or procedures and their disclosures to investors.\u00a0<\/h4>