United Capital’s Joe Duran suggests that the glory days of independent advisors may be over, citing four threats likely to cause disruption and change:
- Larger mutual funds and national custodians, who already have a direct business to consumer business and brand.
- Super-advisor groups with more than $10 billion.
- Robo-advisors going after younger clients with much cheaper pricing and better technology.
- Big banks and wire houses like Merrill Lynch and Wells Fargo, which have created cheaper offerings for the mass affluent.
Duran’s analysis of the wealth management is interesting because in most cases the DC business is further ahead. When new data about the number of advisors working in the DC market emerges, it’s going to surprise people to realize that the retirement market is now driving the wealth management business, not the other way around as most experts would have us believe.
Take Duran’s threats to smaller wealth management advisors. The larger mutual fund companies and record keepers who had traditionally sold direct are now embracing advisors. A case in point is Fidelity, whose strategy for the under-$100 million market is run almost exclusively through advisors. Vanguard, through their partnership with Ascensus, is also taking up the advisor model.
There are actually more DC-oriented super-groups (those with with more than $10 billion) than there are in the wealth management business. The big ones like CAPTRUST and SageView are getting bigger, while smaller players like Sheridan Road and Pensionmark are booming. And many others are flying under the radar.
The DC market has already weathered and survived bigger robo-advisors like Financial Engines and Morningstar. And while some larger firms like Merrill have done very well in the DC market, independent advisors seem to be doing quite well.
The biggest threat Duran failed to mention for advisors that focus exclusively on wealth management is DC plan advisors that will likely steal their clients who are participants in their DC plans. It’s much less expensive for plan advisors to acquire wealth management clients from within their DC plans, allowing them to build scale and efficiencies. In many cases, smaller, independent wealth management advisors will struggle to compete unless they embrace the retirement market.
