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Snapshot of State-Registered FAs — Where They Are and How They Charge

By Ming Li May 7, 2021

There were 17,454 state-registered investment advisor firms in 2020, and California, Texas, Florida, New York and Illinois were the five states with the most registrations.

California had 2,959 registrations last year, while Texas had 1,340, Florida had 1,112, New York had 828 and Illinois had 736.

That’s according to the latest report by the North American Securities Administrators Association, which provides a glimpse into the world of RIAs in various U.S. states.

“2020 provided challenges for everyone and state securities regulators were no exception. The membership and industry both had to make adjustments to the rapidly changing landscape pretty much overnight,” NASAA says in the report, published last month.

“With the shift from traditional regulation processes to the use of virtual tools and technology, communication and flexibility were key to ensuring registrants stayed in compliance and investors were protected,” the group added.

The five states with the largest rise in RIA firm numbers in 2020 were Florida (up by 23 firms), Ohio (22), Texas (19), Arizona (14) and Nevada (10), NASAA says.

Overall, the number of state-registered RIA firms declined by 79 last year, according to the group.

Most state-registered investment advisor firms are small businesses, according to NASAA.

Eighty-one percent of the practices have one or two employees, the group says. Around 95% have registered investment advisors, 48% have insurance agents and 36% have broker-dealer registered representatives, the group adds.

State-registered advisors “work in almost every town in every state across the country, mostly in one-to-two person shops staffed with licensed professionals exclusively,” NASAA says.

The majority, or 81%, of the practices serve retail investors, 16% serve high-net-worth clients, while 3% have other clients that were not detailed in the NASAA report.

State-registered investment advisor firms offer a variety of services, but their main focus is individual portfolio management because their customer base is “everyday Main Street Americans,” according to NASAA. Most offer broader financial planning services, it adds.

The majority, or 84%, of the state-registered investment advisor firms collect the most common type of fee in the industry: a fixed percentage of client account assets, NASAA says.

Many have other fee models: 52% of the practices charge hourly fees; 51% have a fixed or flat fee; 9% charge performance fees; 3% charge commission; and 1% of firms use subscription fees, the group says. Around 15% have other fees, but they were not identified in the NASAA report.

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Tags:  Fees and compensation , Staffing and recruiting

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