Record RIA Growth Is Great. Here’s the Catch

The wealth management industry just can’t stop breaking records. 

The number of financial advisors, clients and employees — not to mention assets under management — are all at record highs, boosted by strong financial markets and growing demand for financial advice. With all that success, however, comes an evolving regulatory landscape, an increasingly sophisticated consumer and new technologies including the elephant in the room, artificial intelligence. “Clients currently want more than investment management,” said Robert Sofia, founder and chief executive at Snappy Kraken. “They’re looking for advisors who can handle tax strategy, estate planning, insurance and even lending coordination, and that demand is creating natural opportunities for RIAs.”

As technology continues to reshape wealth management practices, firms are leaning into automation, helping them segment clients and scale their practices. “There’s a clear trend toward better personalization and more systematized lead generation, which are critical for firms that want to compete long-term,” Sofia added. 

Lane Ends, Merge Ahead

But all that has led to considerable growth — and considerable consolidation. The number of advisors registered with the Securities and Exchange Commission reached 15,870 in 2024, more than double the 6,949 advisors in 2000, according to the latest Investment Adviser Industry Snapshot report by the Investment Adviser Association. There was also a seven-fold increase in assets under management over the same period to $144.6 trillion compared with $20.3 trillion in the year 2000. Advisors served some 68.4 million clients last year, which compares with 64.1 million in 2023.

Not surprisingly, that has led to monster M&A activity. According to the Snapshot report, 29.3% of SEC registration terminations last year were the result of mergers and acquisitions. In comparison, 14.5% of registration terminations in 2014 were the result of transactions. Industry consolidation is also impacting state-level advisors. The number of state-registered advisors, which have less than $100 million under management, dropped by 1.6% from the prior year, which was caused by advisors reaching the $100 million AUM threshold — or the result of smaller firms being acquired.

Sure, RIAs are growing, but it’s at the expense of the traditional brokerage industry. Last year, for example, while the number of SEC-registered RIAs grew by 1.9%, the total number of brokerage firms dropped by 2.4%. In terms of individual advisors and brokerage reps, the number of brokerage representatives dropped by 6.1% over the past four years while the number of investment advisor representatives grew by 30%.

Instant Regulation

Against the backdrop of the steady growth and growing popularity of the RIA space, the report also addresses the potential for a looming regulatory shift. Lead authors Karen Barr, president and CEO of the Investment Adviser Association, and Jamila Mayfield, chief regulatory services officer of COMPLY, warn that next year’s Snapshot report may be reporting on a “significantly changed” industry. “Unsettled markets and economic uncertainty could mean lower growth in 2025,” they write. “At the same time, a dramatic shift in regulatory emphasis under a new administration could result in major changes in the landscape for advisors.”

According to the report, “there was a significant increase in reported disciplinary issues related to the SEC and Commodity Futures Trading Commission” in 2024. The number of advisors reporting that they were found to have violated regulations or statutes, that they paid a civil money penalty or that they were ordered to cease and desist rose 11.4% to 794 from 713 the prior year. Similarly, in 2024, the number of advisors reporting that an order was entered against them rose 10.8% to 710 from 641. “The increases reflect increased SEC enforcement activity, including activity focused on infractions not involving investor harm, such as cases related to off-channel communications,” the report states.

Tick, Tick, Boom. David Weiner, chief growth officer at Savvy Wealth, said the “more aggressive” regulatory oversight is an expected byproduct of the financial planning industry’s evolution. “With regulators increasingly cracking down on digital communication and off-channel recordkeeping, RIAs need to be audit-ready and proactive about setting up their compliance programs,” he said. “This can be a challenge, and stymie growth for smaller, independent firms, of which there are new RIAs coming to market every day.” 

Sofia of Snappy Kraken described regulatory oversight as “potholes firms may not see coming.”

“Off-channel communication is a ticking time bomb because some firms still don’t have adequate systems in place to monitor text messages, WhatsApp and personal email,” he said. 

In terms of marketing rules, Sofia said, “while advisors are excited to use testimonials and performance data now that the rules have changed, too many are rushing into it without understanding the documentation and disclosure requirements. That can backfire quickly if regulators come knocking.”

Market Manipulation. Then there’s the matter of artificial intelligence, which Sofia calls a gray area for marketing. “While AI is powerful and can definitely help firms grow, advisors using it to generate content or communicate with clients need to think about accuracy, supervision and disclosures,” he said. More than half of advisors are using at least one form of advertising and 41% of those advisors include investment performance in their promotional materials, according to the report. The next most popular information used in ads, at 23.6%, is hypothetical performance. Further down the list, 16.3% of ads include endorsements and 9.3% include testimonials.

“Firms should already be working on acceptable use policies and internal audits,” Sofia said.