While the share of managed account assets held at wirehouses has steadily declined during the past decade, fresh growth prospects are apparent in other channels—notably, banks and registered investment advisors (RIAs). Success in each channel will require asset managers to develop a customized approach, tailored to the needs of each segment, according to the latest Cerulli Edge— U.S. Managed Accounts Edition.
The rise of fiduciary asset management has blurred the lines in retail wealth management—differences between channels are indistinguishable. “A sophisticated national/regional broker/dealer (B/D) practice resembles, and offers the same services as, the largest wirehouse or independent RIA team,” notes Matt Belnap, senior analyst.
Cerulli believes the bank and independent RIA channels both represent strong opportunities for asset managers to expand the distribution of their managed account offerings to fresh advisor markets. While the bank channel has the smallest managed account assets under management (AUM) of any sponsor channel, its assets have grown nearly six-fold during the past decade. Bank home offices are also aggressively encouraging (and in some cases incentivizing) advisors to move client accounts, especially those high-net-worth accounts with more than $2 million, to their managed account platforms. These platforms are generally more profitable, typically require less operational burden for the bank, and lower the potential for conflict of interest with Regulation Best Interest (Reg BI).
Likewise, assets in the RIA channel have grown close to 12% per year during the past decade (the fastest of any advisory channel), making it impossible to ignore. At the same time, however, managers need to assess the bifurcated nature of the channel, as there is little opportunity to reach advisors at scale across independent firms. The sales process is also difficult, requiring substantial investment in data.
Yet, Belnap maintains that the independent RIA channel remains a worthwhile investment to build relationships with the largest and most sophisticated independent RIA practices, despite the cost and time outlay involved. This channel may offer an enhanced opportunity for those managers that struggle to crack AUM or track record thresholds at larger B/Ds or wirehouses. “The independent RIA channel may present an opportunity for smaller, newer asset managers, especially as larger B/Ds continue to prune the offerings to which their advisors have access,” he adds.