RIA employment grew at an even faster rate, up 3.7% to 835,124, with over half (52%) of employees providing investment advisory services, including research. Their numbers rose 20,000 over the past year to 436,256.
The number of RIA clients increased at a much higher rate on a percentage basis. SEC-registered advisory firms reported a 26% jump in clients to 43 million, boosted in part by digital advice platforms.
(Chart: 2019 Evolution Revolution, IAA and NRS)
Regulatory assets under management (RAUM) by RIAs also grew, to $83.7 trillion, almost four times the AUM reached in 2001. That figure, however, overstates assets because more than one advisor and fund subadvisors can claim the same assets, according to the report.
(Chart: 2019 Evolution Revolution, IAA and NRS)
The compound annual growth rate (CAGR) of assets since 2001 is 8.2%, far more than the 4.7% CAGR in the S&P 500, indicating that a good share of asset growth likely came from new clients in addition to gains in smaller cap stocks and other asset classes.
The typical RIA firm in 2019 has $341 million in AUM, nine employees and 141 accounts, according to the 2019 Evolution Revolution report. The firm is more than likely a limited liability company, located in one of 10 states: New York, California, Texas, Massachusetts, Illinois, Florida, Pennsylvania, Connecticut, New Jersey and Ohio, listed in declining order of the number of firms.
The 5.7% growth in the number of firms in the western U.S. is almost three times the growth rate of the number of firms in the east. A little more than one-third of firms have more than one office.
Despite the increasing number of firms, just 148, equivalent to only 1.1% of SEC-registered advisors, manage almost 60%, or $50 trillion, of RIA assets. In contrast, close to 310,000 firms, managing less than $1 billion each, oversee a cumulative 3.1% of total RIA firm assets.
More than 82% of firm clients are non-high net worth individuals, which the report defines as individuals with less than $1 million in assets under management with an advisor or whose net worth is $2.1 million or less, excluding the value of a primary residence.
One key area where registered investment advisory firms have shown little change in recent years is the fees they charge. Just over 95% of individual advisors were compensated as a percentage of AUM in 2017, 2018 and 2019, though a slightly smaller percentage collected commissions — 3.2% in 2019 compared to 3.6% and 4.1% in 2018 and 2017, respectively.
The Evolution Revolution report suggests that the decline in commission-based compensation was likely due to expectations of the Labor Department fiduciary rule, which was eventually vacated.
Slightly fewer advisors are collecting performance-based compensation in 2019 compared with the two preceding years — 37.1% versus 37.4% and 38.2%. But slightly more individual advisors are paid with fixed fees — 44% in 2019 versus 43.3% and 42.3%. A slightly higher percentage of individual advisors are collecting hourly fees: 29.6% versus 29% and 28.5%, in each of the preceding two years. The report suggests the recent increase reflects a preference among younger investors.
The findings of the Evolution Revolution report are based on Form ADV, Part 1 filed by all SEC-registered investment advisors as of April 10.
(Image: Thinkstock) 
(Chart: 2019 Evolution Revolution, IAA and NRS) 
(Chart: 2019 Evolution Revolution, IAA and NRS) 
(Chart: 2019 Evolution Revolution, IAA and NRS) 
