On Tuesday and Wednesday at New York Ritz Carlton, hundreds of CEOs and other business executives met to discuss the latest trends and challenges facing the financial industry -- the growing influence of advisors was hard to ignore.
1. Rapid Expansion of the Advisor Channel: “The advisor channel is still the fastest-growing segment of the financial services industry — that’s why people are flooding toward it,” according to Chip Roame, the managing principal of Tiburon Strategic Advisors.
2. $250 Million: That's the base level in assets under management at which independence works for an advisor, according to Matt Lynch, a principal at Tiburon Strategic Advisors.
"Below that we don't think it makes sense to go independent." He said in looking at advisor M&A activity -- a consequence, he pointed out, of the aging population of planners. Size does matter, he says. And as an advisors near the end of their careers, there are limited exit options -- and "even fewer if you want a liquidity event -- if you think you've got some equity in your firm," Lynch said. Among them: third-party roll-ups, self roll-ups, an internal sale ... or dying with your boots on.
3. The Wirehouses Are Not Facing Extinction: Wirehouses have lost just $60 billion of a total $5 trillion, but Roame says they aren’t going anywhere. "Stop making it up," he says. The average wirehouse advisor's book is $90 million, and the average independent advisor manages just $25 million. It's not quite an exodus.
4. An Aging Group: Lynch said financial advisors are an aging group --age 57 on average -- that in general hasn’t successfully addressed the continuation of their business.
5. The True Influence of the U.S. Consumer. Bob Doll, the chief equity strategist at Nuveen Investments, said that the U.S. consumer is 70% of the economy, but makes up only 28% of the stock market's profits.
6. Gen X & Gen Y: Younger investors want transparency, quick responses, collaboration and technology. They believe what's on their iPhones, they want less risk, and they want access online, Lynch said. Younger investors tend to be more conservative, with low debt and high savings, but "they're less willing to move forward amid uncertainty without communication."
6. ETFs: In response to the predicted end of hedge funds, Roame said that the prediction is hugely exaggerated, while exchange-traded funds continue to grow. These products are good for distributors, but bad for active asset managers, according to Lynch. The key question to ask: Will ETFs continue its rapid growth trajectory?
7. Bull Markets: "People are not very good at identifying bull markets, they are NOT the days of wine and roses until the seventh inning," says Rich Bernstein, CEO of Richard Bernstein Advisors. tutions.
8. Financial Advisor Models Are Multiplying: Advisors have more options in choosing how they want to run their business whether they want to be part of an independent, captive, hybrid model, etc. Roame points to Raymond James and LPL as two firms who have widened the swath of options available. For the home office, “It’s all about economics,” Roame says. “I’ll work with any advisor any way they want to work with me as long as I make about the same profit margin.”
9. The Real Wealth Transfer: The transfer of wealth really begins in 2026 when the Boomers start moving $2.5 trillion every five years.
10. Emerging Markets: Doll said that emerging markets need to live up to their high expectations. There's still "ginormous" potential, according to Roame, on the emergence of the middle class in India and other emerging economies.
11. The Rise of Discount Brokerages: In a proclaimed "radical predication," Roame said discount brokerages, notably Fidelity, TD Ameritrade, E-Trade, Scottrade and Schwab, would dominate in the years ahead. In one decade, he said, the number of discount brokerages and the number of bank branches will be turned upside down. According to Roame, the trend is spurred by the 2008 financial crisis that instigated do-it-yourself trading.