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“It’s Our World, Everyone Else Just Lives In It.”
You could excuse the registered investment adviser (RIA) community for feeling this way lately — after all it’s basically true, at least in the financial services industry.
Investment Advisory in general, and the independent variety in particular, is the only finance-related business that’s seen assets under management (and by extension – fees) grow over the last five years. Like a gleaming, late-model luxury sedan casually rolling past the flaming wreckage of post-credit crash Wall Street, our disassociation with the broken down vehicles littering both sides of the highway is simply impossible to ignore.
We are doing better than the bankers (who are being laid off by the tens of thousands globally) and better than the traders (who are having their lungs ripped out by algo-driven toaster ovens five days a week) and better than institutional brokers (who are watching their per-trade commissions now dwindle down into strange, new increments like nano-pennies per share).
And we are most certainly prospering more than retail brokerage. A casual look at the DART reports (daily average revenue trades) from the major online brokerage firms paints a picture of apathy and non-engagement now that all the really active amateurs have moved on to currency and forex as their poison of choice.
I’d also note that we are doing far better than our second cousins in full service retail brokerage in the asset-raising department, but that would be like me telling you that water’s wet – no need to rehash the undeniable secular shift happening there. Jeff Benjamin from Investment News tells us that by the end of 2010, total industry assets were above 2007 pre-crisis levels ($11.2 trillion) but that wirehouses have seen their assets drop during that same period from $5.5 to 4.8 trillion. Five years ago the wirehouse held 50% of the industry’s total AUM, today it’s 43% and dropping – and this includes the $300 billion from BofA that became wirehouse assets as a result of the Merrill Lynch acquisition, without those the picture would be even worse!
But here in RIA-land we’re the Belle of the Ball right now, Adele at the Grammys. A recent report and breakdown of new client assets at TD Ameritrade really hammers this home…
From Registered Rep:
TD Ameritrade continued to rack up double-digit asset growth in the first quarter ending Dec. 31, the company said today. TD Ameritrade Holding Corp., which has a fiscal year ending Sept. 30, reported $10.2 billion in net new assets for the quarter, up 11 percent on an annualized basis…60 percent of those assets came from new advisors on TD's institutional platform…
Meanwhile, RIAs appear to be contributing to higher revenues at the custodian. TD said asset-based revenues accounted for 55 percent of last quarter's $653 million in net revenues; that share is up from 51 percent in the fourth quarter ending Sept. 30.
I can’t think of an example of this kind of growth happening anywhere else in the realm of finance – at least on this scale. (By way of full disclosure, TD Ameritrade Institutional is my own custodian of choice for client assets, 90% of the money I manage is custodied with them.)
Now, there is a great deal of irony in the fact that the online brokers have become an indispensible tool for the brokers-turned-advisers they used to do battle with. Having put the retail broker out of business thanks in part to commission deflation, firms like Schwab and TD and others have now become the custodian partner to those former brokers, many of whom are now at RIA firms serving as investment adviser representatives (Series 65′s).
But this partnership between former foes has allowed RIAs to raise more new money than hedge funds, mutual funds, broker-dealers. Put simply, we’re the hottest thing in the building right now. In the investment management industry, it is most certainly our world right now.
Let’s see if we can avoid screwing this up.
Sources:
TD Ameritrade Posts Higher 1Q Asset Growth (Registered Rep)
Read Also:
Retail Investors Say “No Mas” (TRB)
Wirehouse Market Share Thinning (Investment News)
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Why the gratuitous plug for TD Ameritrade?
Standards, baby, standards.
Yeah, over sized commissions and a 1.75% wrap on MF accounts doesn’t help AUM in the end.
hubris how? none of this has anything to do with me, does it? am I the driving force for the entire industry shift? LOL
This sort of overwrought hubris is about the best indicator there is that your hubris-consumed, self-congratulatory time on the World Stage Of Finance is about to come to an end. And none too soon.
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