Trillion-Dollar Advisory Firms On The Way, Tiburon Analyst Predicts

The fee-based advisor space is growing and will continue to dominate the financial advice marketplace, said Chip Roame of Tiburon Advisors.

“We’re at the beginning of growth, especially on the fee-based advisor side,” Roame said. “Tiburon’s view is that you will see trillion-dollar advisor firms a decade from now.”

Roame delivered Tiburon’s six-month update on the independent advisor space during his regular Thursday conference call. Growth and merger activity are both likely buzzwords for independent advisors going forward, he said.

Tiburon’s updated numbers:

• There are 148,145 independent financial advisors, down slightly from 2018 numbers, but still up over the 130,210 advisors counted in 2017.
• Independent advisors account for $7.9 trillion of assets under management and administration. That figure has steadily climbed and is up from $5.5 trillion in 2015 and $6.9 trillion in 2018.
• Those assets produced $60.8 billion in 2019 revenue, a new high and nearly double the revenue independent advisors accounted for in 2010.
• The assets are not evenly distributed. The 117,600 independent reps control $3.1 trillion in assets, while the 30,500 fee-based financial advisors control $4.8 trillion.
• Edelman Financial Engines is far and away the leading independent financial advisor in terms of clients with 1.2 million. But Roame said at least 90% of them are passive participants in retirement plans. CapTrust Financial Advisors is tops in AUM with $390 billion.

Key Predictions

Tiburon expects continued transition in the independent advisor space. A few important predictions Roame cited include:

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Substantial growth. Tiburon CEO Summit attendees agree, with 54% of CEOs predicting strong growth in net flows over the next five years. In recent years, CEO Summit respondents were lukewarm on growth.

“We expect substantial growth in this market, especially when you measure assets,” Roame said. “It may not be substantial when you measure number of firms because these firms are consolidating.”

Big push into the custodian space. In just the past few months, Morgan Stanley acquired E-Trade and Charles Schwab bought rival TD Ameritrade. Just last month, Goldman Sachs Group pushed into the custodian space with the acquisition of Folio Investing.

“You’ve got a lot of players pushing into the custody business,” Roame said.

Advisors utilizing video technology.  Founded in 2009, Personal Capital is an online financial advice company with nearly all meetings held via video conferencing, Roame said. The company reports $12.3 billion in AUM.

“I think video technology is a super-popular growing model,” he added.

More consolidation. More consolidation of independent broker-dealers and registered investment advisors is coming, Roame said. Notably, RIA mergers and acquisitions soared from 95 in 2018 to 123 in 2019.

Little guys survive. Despite the rush to get bigger and grow AUM, 83% of CEO Summit attendees see room for the smaller RIAs. But 89% also say that at least one RIA firm will reach $1 trillion in assets during the next five years, up from 67% just one year ago.

“It’s the fee-based advisors who have been taking the share and growing really big,” Roame noted.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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