Registered investment advisors (RIAs) were challenged by market conditions in 2022, with total channel assets declining 13%. However, RIAs managed to post their greatest headcount and firm growth over the last decade, according to The Cerulli Report—U.S. RIA Marketplace 2023.

Advisor headcount in the RIA marketplace expanded nearly 8.6% in 2022, which is twice the annualized rate of 4.4% over the past 10 years. This growth is attributed to new RIA firms and breakaway teams continuing to tuck into large established RIAs. According to the research, this trend will continue, but likely at lower annual growth rates as the pent-up pipeline during the COVID-19 pandemic continues to normalize.

The overall total firm count of retail-focused RIAs grew greater than 11% in 2022, mainly supported by a large amount of new independent RIAs (12.3%). The RIA channel remains diverse and fragmented—93% of all RIAs manage less than $1 billion in assets under management (AUM), whereas firms above this threshold manage 71% of channel assets and employ 47% of advisors. Cerulli anticipates asset growth and marketshare gains will continue to be concentrated among firms managing greater than $1 billion in AUM.

“2022 continued to highlight the obstacles that many smaller firms face due to not having the resources or capacity to differentiate and foster inorganic growth in a challenging market. The largest RIAs will continue to dominate as breakaway teams leave employee-based models to join large established RIAs that offer more autonomy, without advisors needing to sacrifice resources that they are accustomed to,” says Stephen Caruso, senior analyst.

The research indicates that future market growth will be supported by continued investments from private equity firms and industry consolidators, allowing these firms to capitalize on acquisition opportunities among growth-challenged firms with complementary processes, talent, and clients.