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Life Health > Life Insurance

Discount Channel for Managed Account Assets Pegged at $169 Billion at Year-End 2011

By Warren S. Hersch

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The discount for managed account assets is projected to grow to 9.3% of industry assets in 2013, according to a new report.

Cerulli Associates, Boston, published this finding in its January issue of the Cerulli Edge—Managed Accounts Edition, a quarterly review of topics and statistics related to the managed accounts business.

The report disclosed that the discount channel, also known as the direct channel, accounted for 7.1% of the overall managed accounts industry, or $169 billion in assets, in the fourth quarter of 2011.

While still only a small portion of the managed account industry, the direct channel has been steadily gaining industry market share over the last 10 years, attaining 7.1% in 2011, up 2.4% of industry assets in 2001, the report says.

Cerulli projects that discount and regional broker-dealers will capture 9.3% and 9.5% of market share by 2013. The wirehouse channel is expected to remain dominant in the market, attaining 50% percent of market share by 2013, down from 54.3% last year.

“Direct providers realized the need to develop greater guidance and advice services to capture a larger slice of their clients’ long-term portfolios,” says Katharine Wolf, associate director at Cerulli Associates. “As such, these providers began developing managed account programs that offer their clients on-going investment management for an asset-based fee and are engineered to appeal to advice-seeking clients.”

The largest direct providers, Fidelity and Schwab, have well-developed managed account programs, with $102 billion and $59 billion in managed account assets, respectively, the report says. Other providers, such as E*Trade, TD Ameritrade, and TIAA-CREF, are in the nascent stages of advice delivery, with less than $5 billion in managed account assets apiece.

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