Trendspotter: Advisor Movement From State to SEC Registration Is Surging

This, she said, "could be driven by several factors."

First: "The growth of existing RIAs who are passing the AUM threshold for SEC registration (i.e., $110M) — in particular, inorganic growth."

Consolidation "has gained tremendous momentum" in the RIA channels, Shtyrkov said.

"Smaller RIAs are increasingly interested in joining forces with larger RIA firms that can offer operational support, economies of scale, or succession solutions. An acquisition or merger can nearly double a firm's size overnight; it can be a rapid growth driver for RIAs, oftentimes catapulting them into a higher AUM tier, especially if they're a serial acquirer or consolidator."

Second, advisor migration to the RIA channels "continues unabated," she said.

"The RIA channels continue to draw advisors — including those operating on large teams — away from employee models as the options for independence proliferate. The path to independence is now well-worn and there are myriad options available to advisors who want more autonomy or flexibility in how they run their business.

"As breakaway teams enter the RIA channels, they may be tucking into an existing RIA firm or establishing their own. Either way, they're likely large enough to warrant SEC registration and are tipping the scales in that direction," Shtyrkov said.

Karen Barr, president and CEO, Investment Adviser Association:

"We are seeing the trend of state registered advisors transitioning to SEC registration," said Karen Barr, IAA's president and CEO.

"Definitely the rise in markets is playing a role," she said.

"The increase in the number of clients gravitating toward fiduciary advice" is playing a big part, as well as "the need for clients to seek advice since the pandemic. During the pandemic, clients are really reassessing their financial situation."

Also, "not only are their clients' assets growing, but they're getting more clients."