2015-2016 MMI Industry Guide to Investment Advisory Solutions

The seventh edition of the MMI Industry Guide provides member firms with:

  • comprehensive statistics covering all segments of the investment advisory solutions (IAS) marketplace,
  • our proprietary annual forecast of future industry growth,
  • survey data on industry adoption of goals-based wealth management (GBWM), and
  • a new research report on GBWM produced in partnership with State Street’s Center for Applied Research, “The Performance Paradox.”

The primary purpose of the Guide is to facilitate member business planning, and the full 126-page report – as well as the individual exhibits and data series - are available for download in the members’ area of the MMI website (www.mminst.org) for use in preparing market analyses and presentations.

What’s Inside . . .

MMI’s Comprehensive Data on the Investment Advisory Solutions Industry

  • Historical trend data for industry sales and assets collected directly from MMI members, organized by market segment, sponsor firm, and investment manager
  • The data is organized and presented across key absolute and relative dimensions:
    • Top-line flows and asset growth
    • Trends across important business segments and channels
    • Rankings of key participants – sponsor firms, investment managers, and third-party service providers

MMI Member Forecast: Continuing Strong Industry Growth through 2019  

  • Sponsor firms project IAS industry growth of 10% per year over the next five years with assets reaching $6.4 trillion by year-end 2019 – somewhat more conservative than the $6.6 trillion in assets and 14% average annual growth rate through year-end 2018 forecast in last year’s survey.

 

  • Asked where the greatest future growth potential is to be found, 71% of sponsor firms chose UMA/UMH and single integrated platforms, up substantially from prior years.
  • The growth of those two segments is projected to come primarily at the expense of Mutual Fund Advisory, cited by a wide margin – 71% of responses – as the market segment with the lowest growth potential, followed by SMA programs at 43%.
  • Selected highlights of key industry trends:
    • The bulk of SMAs have transitioned to model-based delivery. 75% of SMA assets within UMA programs are being delivered via models, as are almost half of traditional SMA assets.  
    • Half of those surveyed indicated that the automation of asset allocation via robo advisors will impact the entire advisory industry and expressed concerns about lower pricing, slower asset growth, and the erosion of the perceived value proposition for advisory services.
    • The consolidation of platforms continues gradually as sponsor firms migrate toward a more streamlined approach and an environment that is product agnostic and includes various discretion options.  
    • ETFs continue to gain market share from mutual funds – especially in large-cap stocks and core bonds – as the shift towards passive solutions continues.

Goals-Based Wealth Management Research

This year’s survey included questions about sponsor firms’ commitment to and progress in the transition to goals-based wealth management. Among the GBWM highlights from the survey:  

  • GBWM continues to gain traction, and an overwhelming proportion of respondents (89%) indicated that GBWM is now a priority at their firms.  
  • When asked to project the proportion of their firms’ accounts that will transition to GBWM over the next five years, the responses were highly optimistic with a roughly fourfold increase – from the current 10% to 38% – predicted at the end of five years.
  • 88% of executives surveyed indicated that their firms were investing a moderate to significant amount in GBWM, but 89% of those same executives thought that their firms’ spending on GBWM wasn’t adequate and should be increased.

New Research from MMI and State Street: The Performance Paradox

The Guide also includes a major GBWM-related research paper, produced in conjunction with State Street’s Center for Applied Research, The Performance Paradox: Overcoming Present Day Misalignments and Delivering on Investors' Long-Term Goals.