SmartAsset study explores RIAs with $1B in client assets

The registered investment advisory firm milestone of reaching $1 billion in assets under management holds cachet for many financial advisors, even though it’s becoming less rare in the industry.

Only 412 RIAs, or less than 3% of those registered with the Securities and Exchange Commission, have topped that high bar in their client AUM, according to a recent study by advisor lead generation and customer matchmaking service SmartAsset. Just nine had more than $50 billion in AUM when the firms’ SEC Form ADV filings were analyzed in August. However, SmartAsset focused on a subset of RIAs that excluded international firms and those with disclosures on their regulatory records. More expansive studies of RIA filings suggest the total number with at least $1 billion is closer to 32% of SEC-registered firms.

Regardless, reaching $1 billion in AUM remains “an achievement in itself,” and the coveted number also speaks to the fact that advisors cannot be “a jack-of-all trades and a master of everything” on their own, said Steve Voss, a former practice management executive at Raymond James who is the founder of newly launched career consulting firm CPX Partners. The continuing flow of M&A consolidation across the industry and the need for RIAs to “identify talented individuals and peers” will boost the number, he said.

“You’re going to start to see advisors teaming together to achieve the scale and the service model that they want to have for their clients,” Voss said. “They’re going to move and consolidate with advisors who complement their skill sets. You’re probably going to start to see that percentage rise as firms come together in the RIA world to achieve scale.”

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The numbers and the data limitations

RIAs with at least $1 billion in AUM “may have found their success through various avenues — whether by leaning into a niche, building scalable systems, or identifying high-ROI marketing approaches — but all have proven their expertise and value to the clients entrusting them,” according to the SmartAsset study, which was authored by the firm’s director of economic analysis, certified financial planner Jaclyn DeJohn. Within the group of 412 firms that were identified, 377 have between $1 billion and $10 billion in AUM and another 35 have more than $10 billion.

In terms of the share of those $1 billion RIAs in each state, high-population New York (21%), California (14%), Texas (8%), Florida (7%) and Illinois (5%) lead the way. When comparing the number of RIAs of that size to the total number in each state, Alaska (13%) was No. 1, followed by Montana (11%), Nebraska (6%), Maryland (4.8%) and Wisconsin (4.6%). Alabama, New Hampshire, Arkansas, Maine, Mississippi, New Mexico, Hawaii, Wyoming, North Dakota, South Dakota and West Virginia had no $1 billion RIAs without any disclosures. 

The slim ranks of firms with over $50 billion in AUM included some RIAs that provide direct, retail wealth management and comprehensive planning services, along with others better known for funds, insurance, employer retirement plans or other financial sectors: City National Rochdale, Rockefeller Capital Management, BlackRock Financial Management, Barings, Savant Wealth Management, Taylor Advisors, Focus Partners Wealth, Flexpath Strategies and Sammons Financial Group Asset Management.

Like with any study examining the SEC’s database of RIA filings, the criteria for SmartAsset’s research affected its conclusions. Other industry studies of the size of RIAs and the number of M&A transactions each year show that the number that have at least $1 billion in client assets is tilting upward. 

In the past six years, 654 wealth management firms of that size have sold a majority or minority of their equity — 38% of overall industry M&A volume during that span, according to investment bank and consulting firm Echelon Partners. The number of those transactions climbed 21% last year to 140, which is slightly lower than the record 145 in 2021 but “well above historical levels,” according to the firm’s latest annual study of industry dealmaking. And that study excluded any firms with more than $20 billion in client assets.

“The overall growth in the number of transactions involving wealth managers with at least $1B in AUM has been strong since 2019, expanding at an annual rate of 19.7%. However, the progression is anything but linear,” Echelon’s report said. “The rebound is a sign that demand for platforms of this size is again increasing, driven by favorable market conditions and robust buyer interest. Many of these $1B firms are professionally managed with strong infrastructure, making them attractive platforms for acquirers entering a new geography.”

A third industry tracking study showed that just shy of one-third of SEC-registered RIAs of any type have at least $1 billion in AUM. The share expanded to 31.6% of firms last year from 28.6% a decade earlier, according to the annual RIA snapshot report from the Investment Adviser Association, a trade, research and advocacy group, and compliance firm COMPLY.

READ MORE: Record-breaking RIA growth, in 5 charts

Stay focused on the mission

Those numbers add context to any claim that reaching $1 billion in AUM is unattainable for startup RIAs. And some harbingers of risk lurking beneath the industry’s prosperity are already beginning to emerge. Many advisors who are at firms express criticism of the consolidation driving the uptick in $1 billion RIAs, although they are much more likely to deliver it anonymously. Solo advisors who are nowhere near that number can still operate profitable, successful RIAs.

Nevertheless, that milestone still holds a lot of sway among advisors, much like $1 million in annual production revenue did about 10 years ago, according to Voss. While $1 billion in AUM comes with some “flash, and, obviously, not many people get to say it,” some of the appeal simply comes down to perception, he said, noting his experience as a cancer survivor reflecting on what is most important to him.

“That’s catchy, it’s trendy, it’s what everyone wants to hear. Nobody wants to say they manage $800 million,” Voss said. “It sounds great, it sounds wonderful, but how do you achieve it? How do you execute on it? If everyone had the answer, we would have more billion-dollar firms out there. That applies to anything in life. As long as you stay focused on your ‘why’ and the purpose of what you’re trying to accomplish, I think anything’s achievable. You just have to stay rooted into the true reason of what you’re trying to accomplish.”