Securities and Exchange Commission-registered investment advisers managed $114.1 trillion in assets in 2022, down 11% from 2021 due to market-related factors, the first decline since 2008, the annual study said Overview of the investment advisor industry published by The Investment Adviser Association and National Regulatory Services, a COMPLY company. This compares to a return of -18% for large US stocks and GDP growth of 9.2%. Meanwhile, the industry ended 2022 with a record high of 15,114 investment advisors, up 2.1% year-on-year.
Industry assets have grown in 19 of the past 22 years, the report said, excluding 2002, 2008 and 2022. About 91% of all assets were discretionary managed.
Looking over the past 10 years, the industry’s AUM is up 8.7%, compared to 5% for GDP growth and 14% for returns for large US stocks, the report said.
The largest companies — those with AUM greater than $100 billion — manage the majority of industry assets, at almost 63%. However, these firms also saw the sharpest declines in AUM, with this group (firms over $100 billion) seeing a nearly 15% decline in assets in 2022.
The industry also saw a decline in the total number of customers, which fell by 4.3% to 61.9 million in 2022. That compares to an average annual increase of 9.5% over the past five years, the report said.
That decline was primarily due to a decline in the number of non-wealth management clients, according to the report, which fell nearly 35% to 7.6 million in 2022. These are clients who receive other types of advisory services, such as model portfolios or financial planning. In fact, the report attributes the decline to a single digital consulting platform, which it doesn’t name.
“This firm was the advisor to more than a third of the industry’s clients in this category in 2021, and the decrease resulted from a change in the criteria for including accounts in this category,” the report said.
At the same time, despite the market environment, demand for wealth management services increased, with the number of these clients increasing by 2.5% to a record 54.3 million.
As much as is said about large consultancies and aggregators, the vast majority (nearly 92%) of consultants had 100 employees or fewer; 70% have less than $1 billion under management and almost 89% have less than $5 billion under management.
“The industry is dynamic, with a significant number of consultants entering and leaving the industry each year,” the report states. “This revenue is focused on consultants with assets under $1 billion. However, 90.6% of industry assets were managed by companies with more than $5 billion in assets.”