Securities and Exchange Commission-registered investment advisors managed a total $114.1 trillion in assets in 2022, down 11% from 2021 due to market conditions, the first decline since 2008, according to the annual Investment Adviser Industry Snapshot published by The Investment Adviser Association and National Regulatory Services, a COMPLY company. That compares to a -18% return for U.S. large stocks and 9.2% GDP growth. Meanwhile, the industry ended 2022 with a record high of 15,114 investment advisors, up 2.1% from the previous year.
Industry assets have grown in 19 of the past 22 years, the report said, with 2002, 2008 and 2022 the only exceptions. About 91% of all assets were managed on a discretionary basis.
If you look at the last 10 years, industry AUM has increased 8.7%, compared to 5% for GDP growth and 14% for the U.S. large stock returns, the report states.
The largest firms—those with more than $100 billion in AUM—manage a majority of industry assets, at nearly 63%. Yet, these firms also experienced the sharpest drop in AUM, with that group (firms with over $100 billion) experiencing a nearly 15% decline in assets in 2022.
The industry also saw a decline in the total number of clients, which fell 4.3% in 2022 to 61.9 million. That compares to an average annual increase of 9.5% over the past five years, the report pointed out.
That decline was driven primarily by a drop in the number of non-asset management clients, the report said, down nearly 35% to 7.6 million in 2022. These are the clients receiving other types of advisory services, such as model portfolios or financial planning. In fact, the report attributes the drop to one single digital advice platform, which it does not name.
“This firm was the advisor for over one-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 asset management services was higher, with the number of these clients increasing 2.5% to a record high of 54.3 million.
As much talk as there is about large advisory firms and aggregators, the vast majority (nearly 92%) of advisors had 100 or fewer non-clerical employees; 70% managed less than $1 billion, and nearly 89% managed less than $5 billion.
“The industry is dynamic, with a significant number of advisors entering and exiting the industry each year,” the report said. “This turnover is concentrated in advisors with less than $1 billion in assets. However, 90.6% of industry assets were managed by firms with more than $5 billion in assets.”