The annual report, now in its fifth year, updates information on investment advisors registered with the Securities and Exchange Commission using the latest data from the SEC’s Investment Adviser Registration Depository , a public-access information resource. Investment advisors advise others on the securities investments in exchange for compensation. They are regulated under the Investment Advisers Act of 1940. In general, those that manage more than $25 million in assets under management are required to register with the SEC and must file annual updates.

Total discretionary assets managed by SEC-registered advisors – something the IAA calls “a core measure of the investment business” – increased from $21.1 trillion in 2004 to $24.3 trillion in 2005, a 15% gain. IARD data makes no reference to assets under advisement.

There were 8,614 SEC-registered advisory firms as of 5 April 2005 compared with 8,302 In early April 2005. But the 359 of those firms that each manage more than $10 billion accounted for 83% of discretionary assets. The 56 firms with more than $100 billion in assets under management collectively accounted for more than 45% of the total.

But the RIA space remains a small-business category. Of the more than 6,000 firms reporting assets under management of between $25 million and $1 billion, more than 5,800 of them said they have 10 or fewer employees. T

The number of SEC-registered investment advisors that specialize in advising hedge funds rose from 1,906 in 2004 to 2,111 in 2005, an increase of about 11%. “Although a number of hedge fund advisers have voluntarily registered under the Advisers Act, there are literally hundreds of other hedge-fund advisers that have not yet done so,” says Keith Marks, a senior consultant with NRS. “As the February 2006 deadline for hedge-fund adviser registration approaches, we expect to see a dramatic increase in SEC registrations by these types of firms.”

The IAA, formerly the Investment Counsel Association of America, is a Washington, D.C.-based industry association that provides advocacy, educational, and business services to about 400 advisory firms. All together its members manage around $5 trillion for individual and institutional clients.

Lakeville, Conn.-based NRS is a compliance consultancy to investment advisors, broker-dealers, investment companies and insurance companies. It’s part of Securities Data Publishing, a division of Thomson Financial.

Click here to see this year’s Evolution/Revolution report. –FWR

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