A report by the Boston-based organization highlights the rise of registered investment advisors now at the billion-dollar AuM mark.
A total of 687 retail-focused advisory firms in the US have reached the $1.0 billion mark for assets under management but in total make up a modest (3.8 per cent) share of all such businesses in the sector, according to Cerulli Associates.
"Since 2012, billion-dollar RIA firms have steadily accumulated asset market share by attracting big teams from other channels and engaging in a significant amount of merger and acquisition activity," Marina Shtyrkov, a research analyst at Cerulli, said.
"The sheer volume and magnitude of M&A also catapults firms into the billion-dollar arena," Shtyrkov continued. "RIAs of all sizes are choosing to merge for a number of reasons: depth of specialization, succession, and growth through economies of scale," she added.
The largest RIAs that have already amassed billions of dollars in AuM are increasingly merging to expand their talent, strengthen their intellectual capital, and create super-regional firms.
This publication has reported on a raft of RIA merger and acquisition deals in recent weeks and months, a trend increasing AuM sizes of the combined firms and part of a continuing consolidation story in a sector facing rising regulatory and client demands.
"Some of the largest RIAs resemble small broker/dealers in size, service, and brand awareness among advisors," Kenton Shirk, director of Cerulli's intermediary practice, said. "Their ability to lure breakaway advisors should be a concern for B/Ds. Half of breakaway advisors prefer to join an established independent practice. Billion-dollar RIAs are becoming formidable competitors for B/Ds," Shirk continued.
Billion-dollar RIAs are also important targets for asset managers, which are evolving their distribution strategies to meet the needs of this fast-growing and complex segment, Cerulli said.
The comments come from Cerulli' report, US RIA Marketplace 2017: Ascendance of the Billion-Dollar Firm.