Financial advisor channels face unrelenting pressure moving forward from discount brokerages and robo-advisor options, a leading analyst said.
But there is plenty of good news in the forecast as well, added Chip Roame, managing partner of Tiburon Strategic Advisors. In particular, the independent advisor channels should continue to see its assets grow at a strong rate, Roame said during a Monday conference call.
In short, there is plenty of business to go around. Tiburon counts 335,000 financial advisors — a stagnant figure over the past 15 years — controlling nearly $25 trillion in assets. While the number of advisors remains the same, the assets they control has more than doubled since 2010, Roame noted.
“An amazingly steady climb up for the past eight or nine years,” he said.
Roame and Tiburon settled on five predictions for the future of the financial advisor channels:
- Financial advisor value will continue to be challenged by discount brokerages and online advice. “Advisors are quick to say, ‘I don’t lose any accounts to those robo-advisors, or to discount brokers,'” Roame recounted. “Well, I’ll tell you that discount brokers and robo-advisors are both growing very fast. So they’re getting accounts from somewhere. So maybe we’re not losing accounts as advisor channels to them. But maybe they’re taking some of our future (business) in the advisor channel. So that’s worth thinking about.”
- The number of financial advisors continues to stagnate, but assets keep growing. Of the $25 trillion in assets, captive channel advisors hold $18 trillion. But the $6.9 trillion held by independent advisors is growing much faster, Roame said.
- An increasingly broad set of financial advisor business model choices to emerge. “You can be captive, independent, semi-independent, you can be a hybrid, you can do a lot of different things,” Roame said. “There’s a lot of different ways to be a financial advisor today.”
- A steady flow of breakaway brokers. While some analysts “overstate” the breakaway broker trend, Roame said, it is a trend nonetheless. And it is “a one-way flow generally” from a host of channels into the independent channel. That is expected to continue, he added.
- Fee-based financial advisors continue to gain a market share. The registered investment advisor channel will grow the fastest of all, Roame predicted.
Tiburon’s predictions for the financial advisor channels corresponds with results from its survey of Tiburon CEO Summit attendees. The semi-annual summit is attended by executive vice presidents and above from the industry.
Tiburon asked attendees whether they see the role of financial advisors gaining or losing value for clients. Seventy-three percent of respondents chose “gain,” a similar number to the 2010 survey, but a sharp rebound from the pessimistic 46% three years ago.
Forty-three percent of Tiburon CEO Summit attendees said they expect “moderate growth” in the number of financial advisors over the next five years. While not a majority percentage, it is the highest pro-growth number in five years.
For its part, Tiburon is predicting a steady decline in financial advisors, from the current 335,000 to 315,700 in 2024. They will oversee an expected $28 trillion worth of assets.
Eighty-six percent of Tiburon CEO Summit attendees expect the independent advisor channel to grow the fastest, similar to past years. But 9% expect banks and insurance companies to be the fastest growing channel, up from just 4% last year.
Regardless of which channels see the most business, there would seem to be a demand for more financial advisors, Roame said.
“To me, it’s interesting that it’s not growing,” he said. “Because as baby boomers are aging, as more of them need help and advice, one might have thought that the number of advisors would have grown. And it’s held it held steady or stagnated now for some 15 years.”
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org. Follow him on Twitter @INNJohnH.
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