Posted on April 25, 2012 by Scott Bell
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Before we had kids, we travelled a lot. Once to Bonaire. And, it was/is simply beautiful.
You drive a Suzuki Samuri all over this little 5 mile wide island. Filled with sandy beaches and beautiful vistas. You back up the jeep to the water, strap on your scuba gear, and maybe 10 yards into the water is some of the most amazing scuba diving in the world.
I probably shouldn’t even be telling you this, because it’s that awesome.
My wife & I immediately decided, if we ever needed to move somewhere as part of our plan B. This would be our haven. We did the whole story line, complete with owning a bed & breakfast. We’d buy a small business too. Scuba dive daily. Eat lots of seafood. The kids (we didn’t have yet) would meet people from all over the world. We’d probably even make enough money to sock away for the rarely rainy days we’d experience living there. It was a fantastic dream. Magical. And then we talked to the locals. They all laughed. We hadn’t heard the joke.
“How you make a small fortune in Bonaire?” …You start with a large fortune.
And everyone in the financial world is staring at another magical coastline, with a $10 TRILLION dollar view. Which, I’d say is a rather large fortune.
The math basically breaks down like this: $2 trillion is buried in independents, $5 trillion is sloshing around the wirehouses, and another $3 trillion is in the DIY market. The math actually sounds a little fuzzy to me, but that’s generally the number I hear thrown around that seems to whet the appetite of investors in the new Online Financial Advisor space these days.
The reality is banks are, at some point, going to be a huge distressed real estate play themselves. The number of bank branches has expanded from something like 21,000 branches in the 1970s to over 80,000 in 2010. They’ve quadrupled their physical presence in an era when most people are doing more & more online. I see it first hand. Schwab and TD Ameritrade have online services I only dreamed existed just 4 years ago in my wirehouse days.
And just 12 years ago, I often met clients in-person for any number of things: forms being signed, review meetings, to talk about the markets — often with a stack of papers in tow. And these days, I can do most of it from my iPad — including having a video chat. That shift has yet to be fully realized. And the chart you’re seeing to the right is the data to back it up. (ht: @brettking)
So, online is not a replacement by any means, it’s more of an enhancement. Today clients like being able to see where their account is daily, weekly, monthly, and see transactions & fees quickly & clearly. They like seeing their money online now. Five years ago most of them couldn’t have cared less, “I’ll just look at the monthly statements, don’t sign me up for the website.”
This trend isn’t some anomaly. These aren’t even first movers we’re talking about. This has been a slow rolling reality for the last 5 years with services like Skype and Dropbox. The video camera on iPhones and iPads has started to accelerate it, of course — but the foundation for virtual is pretty well established.
Now, unlike the pretty picture above, I’m keeping this next one plain vanilla, trying to be as fair as possible. If someone wants to comment or fix any errors I’m happy to listen. I’m also not going to make any snarky comments about what you are about to see. But I will say this: a small fortune has been raised thus far, $80 million dollars by the eight firms you’re seeing here, to tackle the realities facing the large fortune sitting inside of the incumbent Wall Street firms.
I guess we’ll see if it all turns out to be a bad joke or not.
Click pic to grow.
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I think Wealthfront raised about $20+ million.
It’s somewhere in the “Robo Advisor” video I shot in February. John Prendergast talks about it.
http://youtu.be/tDpsbimSrfk
I think you’re right, but I didn’t want to stray from Crunchbase’s numbers.
BTW — Great interview Bill. John & Alex are working on some really great ideas, and I have a great deal of respect for both of them. Thanks for sharing.
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