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.