State of the Wealth Management Industry 2017

Fidelity recently released a report on their perspectives of the State of the Wealth Management Industry 2017: The New Value Drivers. Perspectives provided by Sanjiv Mirchandani, President, Fidelity Clearing & Custody Solutions.

Highlights:

What industry will look like in 2026

Two kinds of opportunities to be successful:

1. Large player with greater scale
2. Focused player with distinct niche

The Big Squeeze created by pressures in the industry:

• Investors
• Regulators
• Competition

How do you win? Value.

3 drivers of value:

1. Drive better outcomes for clients
2. Build Digital into your DNA
3. Create sustainable enduring firm

Organic Growth:

In 2016 the net organic growth of Fidelity clearing and custody clients dipped to 1.5%, down from 2.8% just 3 years ago. Organic growth is the net new client money you receive each year, excluding market action – divided by your beginning base of assets.

Fidelity Organic Growth Rates:

• 2013 2.2%
• 2014 2.8%
• 2015 2.5%
• 2016 1.5%

The assets withdrawn from existing clients now outpace new assets from existing clients.

Fidelity reports that in 2016 for example:

• 8.4% new assets from new clients
• 12.6% new assets from existing clients
• 4.2% assets withdrawn by departing clients
• 15.4% assets withdrawn by existing clients
• 19.6% lost almost wiping out all of the growth

Regardless of the outcome of the DOL rule, advisors are moving to a fee-based model.

From 2004 to 2015 the percentage of advisors who were primarily or partially fee based among all advisor groups increased from 41% to 80%.

Looming Succession Crisis:

• About 300,000 advisors in industry
• About 110,000 likely to retire within 10 years

Retiring less than 5 years:

• 12% of advisors
• 37,684 advisors
• $1.434 Billion in assets

6-10 years

• 23% of advisors
• 72,653 advisors
• $4.368 Billion in assets

Just over 10 years

• 62% of advisors
• 192,171 advisors
• $10.416 Billion in assets

Source: State of the Wealth Management Industry 2017: The New Value Drivers Perspectives from Sanjiv Mirchandani, President, Fidelity Clearing & Custody Solutions