Financial services as a whole is a “fragmented and confusing” industry, said Mike Durbin, president of Fidelity Wealth Technologies.
While Cerulli Associates estimates that, between 2008 and 2019, RIAs will maintain the greatest market share at 5.8%, the retail direct channel—TD Ameritrade, Schwab, Vanguard, Fidelity—is on their heels with 3.5%.
“We’ll see how that tailwind persists given the regulatory change, etc., but there’s clearly something there” said Durbin, speaking at the eMoney Advisor Summit Thursday to give attendees a high-level view of the state of the wealth management industry.
Client-centric firms that can grow organically will be the winners, Durbin said.
He noted firms can support organic growth by building a young client base, clearly defining their customer value proposition, focusing on advisor productivity and segmenting their client and advisor base.
Firms need to get younger, he urged. The Alliance for RIAs found 80% of RIA clients and 72% of BD clients are 50 or older. PriceMetric found firms that have a substantial client base under the age of 45 are growing twice as fast as other firms.
Sanjiv Mirchandani, president of Fidelity Clearing and Custody Solutions, distilled value proposition into a formula, Durbin said. He defines customer value proposition as the functionality of a firm’s offering, plus the client experience, plus the firm’s brand reputation, all divided by the price of the offering.
Regarding advisor productivity, Durbin said, “this still largely is a cottage industry of really good artisans that haven’t really embraced the clear best practices that have emerged.”