1. Continuing importance and dominance of baby boomers.
This generation is about 23% of the population, or 74 million. But it owns $26 trillion in investable assets today (over 50% of the total) and should have $40.7 trillion in 2027 (over 40% of the total).
2. Clear shift to indexing, ETFs and cost-conscious investment products.
In 2018, passive ETFs have $3.4 trillion in assets vs. $1.1 billion in 1993. Passive funds now comprise more than 25% of total assets under management vs. 7% in 1997.
3. Some shift to discount brokerage firms, robo-advisors and cost-conscious financial advice.
Discount and online brokerages had $8.3 trillion in assets under advisement in 2017 vs. $0.4 trillion in 1997. The retail (do-it-yourself) investing businesses of Fidelity and Charles Schwab are now each at $1.5 trillion in assets, close to the level of Wells Fargo Advisors.
4. Managed accounts are dominating the industry.
Including packaged products and those with RIAs, assets in managed accounts were $8.5 trillion in 2017 vs. $2.2 trillion in 2004. Advisors made 51% of their revenue from managed accounts today, up from 41% in 2013.
5. Financial planning is back; it now includes retirement income and other needs.
Investment management has been commoditized and is being taken over by technology. As clients age, they need advisors’ help with retirement income, health care costs, long-term care and longevity insurance; once past age 65, roughly half of adults will need long-term care.
6. Continuing emergence of nationwide RIAs.
There are some 29,000 fee-based advisors today vs. 21,000 in 2004. They have about $4 trillion in assets vs. $0.8 trillion in 2001 and are growing assets by about 11.3% per year.
Tiburon Strategic Advisors brings together more than 200 industry executives and the latest industry data for its twice-a-year summits. At last week’s gathering in San Francisco, Managing Partner Chip Roame zoomed in on the top trends affecting advisors and the wealth management industry.
While Roame walked attendees through nearly 300 slides, the consultant and industry veteran was clear on where he thinks the industry should be focused. Robo-advisors, for instance, do not represent the industry threat that often makes headlines.
The 52 of them in business today have grabbed about $316 billion in assets, he says, which is quite a jump from $16 billion in 2007. However, the narrowly defined robos — firms like Wealthfront and Betterment — now work with just under $17 billion in assets.
Also, while socially responsible investing has attracted $40 trillion in assets worldwide, two-thirds of these assets are based in Europe, Roame points out.
Most socially responsible investments today are made by institutions, women and millennials. SRI-themed mutual funds and ETFs, he adds, had inflows of $6.1 billion in 2017, down from $6.2 billion in 2018.
Check out the gallery above for the six biggest trends Roame outlined.
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