Preliminary Q3 Data Indicates IAS Assets Dropped 5% in Q3 2015

Preliminary data collected by MMI and Dover Financial show that investment advisory solutions (IAS) assets contracted by 5% to slightly over $4 trillion, a drop of about $200 billion, over the quarter ended September 30, 2015. 

After 15 consecutive quarters of positive growth dating back to the third quarter of 2011, this is the first quarter that the industry has experienced a decline in total assets – a decline that is mainly attributable to the overall market slump during the quarter that saw the S&P 500 fall 6.4%. Assets in each of the principal IAS market segments were lower than in the second quarter, as the rate of contraction by segment ranged from roughly -4.5% to -5.5%. 

Source: Money Management Institute, Dover Financial Research

While third quarter net flows of $32 billion were approximately 50% lower than the prior quarter, all IAS segments posted positive flows in the third quarter.

Source: Money Management Institute, Dover Financial Research

The quarterly net flow trends are indicative of an industry in transition as the consolidation of platforms appears to gather momentum and firms, financial advisors, and clients all increasingly see the benefits of consolidating different types of investments in a single custodial account in which assets can be managed holistically. UMA net flows exhibited continuing strong growth of $12.4 billion during the quarter, while SMA net flows declined dramatically to $1.9 billion and Mutual Fund Advisory net flows reached a recent low point of $3.7 billion. In addition, net flows into Rep as Advisor accounts, a nondiscretionary fee-based account model, continued to trail off at $1.1 billion for the quarter while Rep as Portfolio Manager net flows of $12.5 billion represented nearly 40% of total IAS net flows for the quarter – indicative of the appeal that the discretionary nature of RPM programs has for advisors looking to exercise more control over portfolio construction.

NOTE:  The Q3 2015 data discussed in this release is preliminary and subject to change. All IAS statistics are still being reviewed for accuracy by member firms, Dover Financial, and MMI. This “early look” at the Q3 data was facilitated by MMI OnDemandthe online data analytics tool now being rolled out to member firms. The full MMI Central report with complete Q3 data will be available next week.