Displaying items by tag: AUM

Thursday, 19 September 2019 13:35

Passive Finally Overtakes Active

(New York)

It has been a decade in the making, but it finally, unceremoniously, happened. The AUM in passive investment vehicles, like ETFs, has finally overtaken that in actively managed ones, like mutual funds. As of August 31, money in passive funds totaled $4.27 tn, just a touch higher than the $4.25 tn in actively-managed funds. In a good summary of the overall change in landscape, the Wall Street Journal says “That shift lowered the price of investing for individuals, reduced the influence of stock pickers and turned a handful of Wall Street outsiders into the biggest power brokers in the industry”.


FINSUM: Every advisor reading this column knows exactly why this happened, but it is nonetheless a landmark moment. It is also perhaps a warning sign—which side is driving the market?

Published in Wealth Management
Wednesday, 22 May 2019 08:50

Wirehouse Market Share Keeps Declining

(New York)

Wirehouse business may have gotten a boost from the demise of the fiduciary rule, but its decline has been uninterrupted for years. New data from 2018 is in and shows that wirehouses shed 5.7% of their client assets during the year. Advisor headcount also dropped by 403 advisors, brining the total to 54,030. According to the study, put out by Aite Group, “Wirehouses have steadily ceded market share from 2008 to 2018 … The segment has lost a total of 10 percentage points over that time period. As wirehouses continue to rationalize the size of clients they serve in advisory relationships, they also continue to see an outflow of advisors into other industry channels”.


FINSUM: RIAs and IBDs have been taking market share from wirehouses for years and the reasons why are obvious—better selling points for clients and better compensation. We think it is also a product of the demographics of the industry—as advisors get more senior and established the economics of going independent become more alluring.

Published in Wealth Management
Monday, 22 April 2019 12:41

Why Financial Advisors Should Work in Teams

(Washington)

The lone wolf financial advisor is steadily becoming a rarity in the wealth management industry (Edward Jones advisors aside!). For instance, 77% of Merrill Lynch advisors now report that they work in teams, up from 48% in 2013. Whether you work solo or in a team, one thing many might not know is that FA teams tend to grow their AUM and client base much faster than solo advisors. The advantage seems to be derived from two key aspects. The first is that a team has a wider variety of skill sets to help deliver comprehensive services to clients. The other is that having a team in place makes clients worry less about the impact of losing a single advisor via illness, death, or leaving the firm.


FINSUM: The team approach seems to be working across the industry, with clients liking the change. That said, forming teams comes with its own set of significant risks and considerations.

Published in Wealth Management
Monday, 16 July 2018 09:16

Average Client Assets Hit New High

(New York)

In what certainly seems to be a sign of health for the industry, RIA average account sizes just hit a new high. The average client at a US RIA now has an account averaging $2m (at firms with over $250m in AUM). This is the first time the figure has ever crossed the $2m threshold. Median AUM for firms grew over 16% in 2017, with average revenue increasing to $3.6m. The stats come from an annual Charles Schwab survey, with the firm saying about the healthy results “Firms are fueling their organic growth by differentiating and marketing their value propositions, improving the client experience and strategically expanding their service offerings to meet the needs of their ideal clients”.


FINSUM: The fiduciary duty of RIAs seems to be a differentiated and continued source of new client demand. It is a testament to the quality of RIAs in this country.

Published in Wealth Management
Tuesday, 10 July 2018 09:57

How Tech is Transforming RIAs

(New York)

It may have become such a part of your daily routine that you don’t notice it, but new technologies have completely transformed the RIA business. “The revolution in fintech has allowed advisors to now do in minutes what it used to take them all day to do”, says Wealth Management. With all the portfolio management software, robos, and beyond, technology has changed the nature of the business more towards client engagement and offering insights and opinions. One small RIA says new technology means they can grow AUM 10x but only make two new hires.


FINSUM: Technology does seem to have changed the nature of the business by taking out much of the mechanical work. We haven’t seen anybody that is upset with the change.

Published in Wealth Management
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