What Is the Future of Wealth Management?

TL;DR

The future of wealth management is shifting toward independent registered investment advisor firms as advisors seek autonomy and clients separate advice from product sales. Schwab’s RIA custody assets grew from between $400 billion and $500 billion to $1.7 trillion over ten years, while about $3 trillion could move in the next 24 to 36 months. Read on for the forces accelerating this movement.

Transcript

right next to me we have Cheryl penny and Cheryl is the founder and CEO of dynasty Financial Partners which is an integrated platform for high-end re our IAS before founding dynasty in 2010 Cheryl worked at Smith Barney where he spent much of his time in the field with financial advisors as well as running several of their wealth management busines... Read More

Key Insights

• 👾 The independent space is experiencing significant growth, with assets flowing into registered investment advisor (RIA) firms.
• 💗 Succession planning is a growing concern, with funding for acquisitions and transitions coming from well-funded firms and private equity.
• ❓ Technology, including AI and blockchain, is expected to have a transformative impact on the industry, but widespread adoption is still in the early stages.

Questions & Answers

Q: What is the future of wealth management?

Wealth management assets are increasingly moving toward independent registered investment advisor firms and smaller boutiques. The panel describes this shift as a movement rather than a trend and expects it to accelerate as independent models offer greater flexibility, technology, and customization.

Q: Why are assets moving to independent wealth management firms?

Breakaway advisors want higher payouts, more autonomy, and opportunities to capture value in their practices. Clients are also choosing to receive advice separately from organizations that manufacture and sell financial products.

Q: How much wealth management money could move to independent firms?

The panel estimates that about $3 trillion will move in the next 24 to 36 months. Custodians and platform firms are increasing staff to absorb the expected volume of breakaway brokers.

Q: How have Schwab’s RIA custody assets changed?

Schwab had between $400 billion and $500 billion in RIA custody assets ten years earlier. Those assets grew to $1.7 trillion, representing roughly $1.2 trillion in new assets over ten years.

Q: Are advisors or clients driving the move to independent wealth management?

Both groups are driving the movement, but clients account for the larger share described by the panel. About one third of the flows come from breakaway advisors, while two thirds come from breakaway clients.

Q: What investment products are attracting wealth management assets?

The panel reports strong flows into passive products in more efficient markets and into operationally efficient asset products such as UMAs. It also identifies increasing interest in private equity, ESG products, portfolio customization technology, and qualified opportunity zone funds.

Q: How quickly are independent wealth management channels growing?

Over the last ten years, assets in independent channels had compound annual growth of 6 percent. Wirehouse assets grew by 3 percent over the same period, according to the data cited by the panel.

Q: How is financial technology affecting independent advisors?

Independent advisors previously traded freedom and autonomy for reduced access to technology, capabilities, and platforms. Investments in FinTech have improved the tools available to smaller firms, helping accelerate movement toward independent and hybrid RIA models.

Summary & Key Takeaways

• Definition: The independent space includes registered investment advisor firms where clients can receive advice separately from product manufacturing and sales.

• Who: Dynasty Financial Partners supports 47 RIA firms with about $35 billion in assets under management, primarily for high-net-worth clients.

• Number: Schwab’s RIA custody assets rose from between $400 billion and $500 billion to $1.7 trillion over ten years.

• Number: Schwab added roughly $1.2 trillion in RIA custody assets over ten years.

• Compare: About one third of independent asset flows come from breakaway advisors, while two thirds come from breakaway clients.

• Number: Fidelity and Schwab each received more than $100 billion in net new RIA custody assets annually for four or five years.

• When: About $3 trillion is expected to move within the next 24 to 36 months.

• Compare: Independent-channel assets grew at 6 percent compounded annually over ten years, compared with 3 percent in wirehouses.

• Who: Breakaway brokers seek higher payouts, greater autonomy, and opportunities to capture value in their practices.

• Tool: FinTech investments give smaller firms stronger technology, capabilities, and platforms for delivering client solutions.