Between 2004 and 2012, the number of RIAs grew steadily at an annualized rate of 8%, while other advisory channels have contracted by more than 1% a year, according to a study by research firmCerulli & Associates.

Researchers attributed the decline mainly to older advisors who are retiring and a paucity of young advisors emerging to replace them.

“RIAs are the sole growth story in a shrinking industry,” Cerulli DirectorBing Waldert said in a statement. He called the channel “one of the industry’s most buzz-worthy trends.”

‘CHANGING LANDSCAPE’

The shift is “testament to a changing landscape,” saysMark Tibergien, president of Pershing Advisor Solutions, which custodies assets for advisors across multiple channels.

The overall shrinking of the retail financial services business “is due to demographics, economics and a desire for some to change their business model,” says Tibergien, whose company has been tracking the trend.

Currently, the insurance channel counts the most advisors, according to a Cerulli study from earlier this year.

GROWTH IN BREAKAWAYS

Among the factors fueling RIA growth has been the “breakaways” of advisors with established practices from employee or independent broker-dealers, who go on to launch their own advisory firms, according to Cerulli.

Yet many broker-dealers are responding to the shift by coming up with incentives to better support the RIA model, Tibergien notes.

And breakaways are “not the sole source of growth for the RIA channel,” according to Waldert. “Nontraditional competitors, such as law and accounting firms, have entered the advisory industry.”

Meanwhile, wealthy clients must choose from an dwindling number of advisors overall.

“That is why this is such a compelling career choice for young people,” Tibergien says. “An oversupply of clients and an undersupply of people to give advice.”