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Assets in direct-to-consumer platforms will exceed $9 trillion by 2022, according to global research and consulting firm Cerulli Associates.

Cerulli defines the retail direct channel as any sale of investments — such as mutual funds, exchange-traded funds or individual securities — to a retail investor client without the help of a traditional advisor.

Currently, the direct-to-investor channel accounts for more than $7 trillion in assets under management and maintains relationships with nearly 40% of U.S. retail investor households.

Over the next several years, Cerulli expects the growth of this segment to be driven by a combination of investor choice and investor returns.

According to Scott Smith, director at Cerulli, traditional advisory firms, reliant on local advisors for asset gathering, will need to adapt to face the growing presence of firms in this segment.

“As direct providers increasingly layer in enhanced advice offerings with access to highly trained advice personnel, traditional advisory firms will need to redouble their efforts to maintain their market share in the face of the growing presence of the firms in this segment,” Smith said in a statement.

According to Cerulli, traditional advisory firms are likely to find it harder to differentiate their offerings.

According to Smith, providers can help investors better understand their relative progress toward goals by encouraging them to use online planning tools. These tools can also uncover unmet product needs, he added.

“To boost user engagement, providers must consider making their planning suites as modular as possible, with frequent feedback to reward incremental progress,” Smith said.

Another opportunity for platform providers to increase customer satisfaction is the use of artificial intelligence technology to augment online support and chat features.

“By logging users’ previous actions and stated goals, these tools will be better able to anticipate what answers investors seek and present product solutions even before investors know they want them,” Smith said in a statement.

The Top Providers

The direct platform space is concentrated, with the top four providers being Fidelity, Vanguard, Charles Schwab and TD Ameritrade/Scottrade.

Fidelity retains its position as the largest direct-to-consumer platform, topping $2 trillion in assets. With TD Ameritrade’s acquisition of Scottrade completed in early 2018, the four largest platform providers account for 84% of the segment’s assets.

According to Cerulli, firms in the space have done well as a result of their affiliations with retirement plan recordkeeping divisions, creating a path of least resistance for rollovers to individual retirement accounts.

Firms aiming to gain share in this market need substantial financial resources and pipelines to connect with retail investors, according to Cerulli.

For example, Cerulli finds that BlackRock’s recent investment in the Acorns emerging investor platform signals a unique opportunity for both firms in this regard.

“With management of more than $6 trillion in total assets, BlackRock has imposing scale, while Acorns maintains relationships with 3.3 million investors — an impressive client base, albeit with currently limited assets,” the report states.

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