Investment Advisory Assets Expected to Reach $6.7 Trillion by 2020, According to Money Management Institute Member Survey

Friday, December 16, 2016

Assets predicted to increase 11 percent annually over the next five years as unified managed accounts lead growth; firms challenged by fee compression.

NEW YORK – DECEMBER 15, 2016 – A new survey of member organizations of the Money Management Institute (MMI) predicts that Investment Advisory Solutions (IAS) will experience average annual growth of 11 percent per year between 2016 and 2020, with total industry assets reaching $6.7 trillion by the end of 2020. This growth would extend the pattern of steady year-by-year increases since the end of the financial crisis at the close of 2008.

The report, MMI Industry Guide to Investment Advisory Solutions, developed in partnership with Dover Financial Research, includes overall assets and growth by advisory platform type, as well as other analysis on industry trends. This year, these include the evolution of technology and regulatory compliance and a special section on data related to fee compression in UMA program pricing.

“This year’s survey paints a picture of an industry that continues to find new ways to grow, and we see great opportunities for the financial advice industry as we look to 2017 and beyond,” said Craig Pfeiffer, President and CEO of the Money Management Institute. “Naturally, the industry is still very much focused on the potential business implications of the Department of Labor fiduciary rule, but technology is also driving a wave of change -- helping advisors increase their efficiencies, and offer a greater array of options that attract advisory business and improve the client experience.”

Key findings from the report include:

  • Investment Advisory Solutions (IAS) assets have seen steady year-by-year increases since 2008 and reached $4.3 trillion at the close of the first half of 2016. Unified Managed Accounts (UMA) and Rep as Portfolio Manager (RPM) led the positive growth over this period.
  • More than half (57 percent) of sponsor firm respondents found that UMA/UMH (Unified Managed Household) and single integrated platforms had the greatest future potential for growth. 
  • Three market segments – RPM, UMA and SMA (Separately Managed Accounts) – are projected to join MFA (Mutual Fund Advisory) with assets above $1 trillion by 2019, according to respondents. By 2020, RPM assets will surpass MFA assets for the first time.
  • The popularity of UMAs can be explained by the integrated advice delivery they enable, their ease of use and flexibility, scalability and efficiency, and the high-net-worth account aggregation opportunities they offer.

Among the advisory and business trends highlighted by the survey, firms continue to focus on the business implications linked to the Department of Labor fiduciary rule and developing the necessary compliance infrastructure. The continued evolution of robo (and robo-assisted) distribution is also seen by many respondents as a potential threat to more traditional financial distribution channels. This has led organizations to focus more attention on developing their value proposition, increasing customer service standards and providing more options to investors (including their own robo-offerings as complements and standalone services).

Fee compression generated considerable discussion across the financial services industry. The majority (90 percent) of sponsor firm respondents cited fee compression as a factor, with 39 percent indicating that their actual all-in client fees had declined by between 6 and 10 percent. According to the survey, among the forces driving price compression are intensified competition among investment managers, greater regulatory scrutiny, a movement toward greater pricing transparency, increased competition from low-cost distribution options, and mass access to lower-cost passive products, such as ETFs.

The report provides a broad array of quantitative data collected directly from MMI members that includes top-line IAS net flows and asset growth, trends across key advisory business segments, and rankings of platform sponsors, investment managers, and third-party service providers. It also includes a consolidated forecast of industry growth that is based on a survey of advisory platform sponsor firms. Respondents were asked to provide industry trend information and five-year projected growth rates for the principal IAS market segments.

For more information about the survey or to obtain an executive summary of the report, please visit http://www.mminst.org/sites/default/files/2016-17-Industry-Guide-Executive-Summary.pdf

About the Money Management Institute (MMI): Since 1997 MMI has been the leading voice for the global financial services organizations that provide financial advice and professionally-managed investment advisory solutions to individual and institutional investors. Through industry advocacy, educational initiatives, regulatory affairs, data reporting, and professional networking, MMI supports and advances the growth of a diverse spectrum of investment advisory solutions that serve an evolving worldwide financial landscape. MMI member organizations are committed to the highest standards of fiduciary responsibility and ethical conduct and to creating the most successful outcomes for investors at every level of assets. For more information, visit www.MMInst.org.

About Dover Financial Research (Dover): Dover is a boutique Boston-based research and consulting firm specializing in the financial services industry. The analysis, independent research, and market intelligence that form the foundation of the MMI Industry Guide are provided by Dover on behalf of MMI. For more information, visit www.doverfr.com.

Media Contacts:

Matt Conroy
Peppercomm
mconroy@peppercomm.com
1-212-931-6133

Joan Lensing
Money Management Institute
jlensing@mminst.org
1-646-868-8518