There are a lot of projections that the independent space is going to earn market share more broadly and the wirehouses are going to go “sideways to down,” according to Matt Brinker, head of national partner development at United Capital.
Brinker pointed to research that Envestnet compiled in April of industry trends. Envestnet’s research projects that wirehouses will continue to lose market share into 2021, while regional firms and RIAs are forecast to gain share.
The research looks at both historical and projected market share of client investment assets across industry segments. In 2013, 38% of the market share was in wirehouses. By 2016, the wirehouses’ market share had dropped slightly to 36%, and by 2021 it’s projected to drop further to 33%.
Comparatively, the Envestnet research finds that the market share of IBDs and RIAs has increased slightly and will continue to do so. In 2013, 13% of the market share of assets was in IBDs and RIAs respectively. By 2016, the percentage of market share for both of these industry segments had increased to 14% each. BY 2021, the research projects that 14% of the market share will be in IBDs and 15% in RIAs.
However, Brinker is not buying it.
“I don’t fundamentally believe that” wirehouses are approaching their demise, he said.
Brinker sat down with ThinkAdvisor during a recent visit to New York to discuss why he’s less worried about robo-advisors and more worried about the wirehouses.
According to Brinker, though, the wirehouses are doing “just fine.”
“We’ve been forecasting this death and the demise of the wirehouse for 20-plus years. If you go back and look at their quarter-over-quarter performance, profits, revenues, they’re at all-time highs.”
For example, Merrill Lynch and Morgan Stanley reported record first-quarter revenue, Brinker pointed out during a recent presentation at In|Vest conference in New York.
Not only are they doing just fine, but Brinker sees the wirehouses, as well as the custodians, moving into the retail side of the business more and more.
“The wires, and the custodians too, are going to move into our space as well,” he told ThinkAdvisor. “Even more so than they are … Any TV show that you watch, you’re going to see Schwab, Fidelity and TD [Ameritrade] pitching their retail services [in commercials].”
According to Brinker, these firms also have more of the bandwidth to invest in the technologies that consumers are demanding.
“Their ability to invest and develop and buy technology to drive what I think is pretty unique ways to engage with clients — coupled with a more fulsome or pretty comprehensive financial planning solution — is formidable,” he said. “I’m less concerned about the Wealthfronts and the robos of the space, and I’m more concerned about what Vanguard is going to do in our space. What the wires are capable of doing in our space.”
And, as Brinker pointed out, the way the next generation of customers want to consume financial services is already changing.
“That next generation of customers … are going to want things differently and consume it differently,” he explained. “If our industry can’t figure out how to deliver to those customer demands and habits, I worry about the growth of our industry. I’m worried because I think there are going to be other organizations [like the wirehouses] that are going to be better-suited and well-prepared to deliver those types of services.”
Brinker sees customer demand and trends soon matching what’s happening in other vendors that have impacted consumption habits, such as Netflix and Uber.
“This digitization, on-demand, real-time planning and engagement with our financial services can’t be any different,” he added.
— Related on ThinkAdvisor: