Wealth Magnets: Assets Under Management at Top CPA Financial Planners

Accounting Today recently released a report on Wealth Magnets: Facing Down Uncertainty by Daniel Hood. Data provided by the Audit Analytics Registered Investment Adviser database showed the top-ranking CPA firms by assets under management (AUM). In addition, some of the uppermost members of the industry were asked how they felt about the fiduciary rule proposed by the Department of Labor and about uncertainty in the financial industry in general.

It is imperative that financial planners stay on top of the latest changes and regulations; it’s part of the job. Advisers said that the proposed Fiduciary Rule would be significant- requiring more filing, documentation, and auditing, as well as increased financial responsibilities to clients. While some companies may be prepared for the changes to come, others are concerned and uncertain about the specifics, and more-so with the delays to the fiduciary rule under the Trump administration.

The Fiduciary Rule is not the only adjustment financial advisers have to adapt to. Other situations include tax or healthcare changes, the aging of clients, and the rise of ‘robo-advisers’, algorithms and computer programs that aim to replace the roles of traditional financial planners. It’s important to integrate modern technology into financial planning to provide clients with great experiences, i.e. responsive service and user friendly interfaces. However, it is also imperative to incorporate human interactions to build trust and relationships with clients.

We thought we would add some of our own insights regarding the topic of robo-advisers, also known as internet advisers. We compiled data retrieved from Form ADV, a required submission by investment advisers to register with both the SEC and state securities authorities. On the Form ADV, advisers disclose assets under management and must apply for SEC registration under a number of criterion, one of which is as a robo-adviser under SEC rule 203A-2(e). Using these data points, we take a look at how much money is managed by robo-advisers compared against all other advisers.

It is clear that traditional advisers are dominating the market from these numbers.The table below shows the significant difference in market share between the two types of advisers.

It turns out robo-advisers are quite insignificant. From purely a number of SEC registrants perspective (given the over 30,000 registered investment advisers filing Form ADV since January), only 134 registered as a robo-adviser. Guided Choice Asset Management is by far the largest robo-adviser with over $13 billion in assets under management. AUM with robo-advisers falls sharply after that, totaling  just over $14 billion. Compared to the $67 trillion held by the rest of the advisers, robo-advisers represent a drop in the bucket of the industry as a whole. Conventional financial planners are still managing significantly more money for their services through face to face relationships with clients, but it will be interesting to see what progress is made by robo-advisers and how their human counterparts might leverage or respond to the technological changes in the industry.

Audit Analytics provides an online database of all Registered Investment Advisers (RIAs), Private Funds, and their Independent Auditors. For additional information, please e-mail info@auditanalytics.com, call (508) 476-7007 or fill out this request form. You can also see our other blog posts on these topics for more insights from Audit Analytics.