U.S. Wealth Management Industry – Special Focus on Mass Affluent Segment
The recent economic crisis significantly decreased client trust in wealth management firms, resulting in a shift toward personalized services and safer products such as fixed income securities. However, the mass affluent offer the wealth management industry high growth opportunities. In the U.S., this segment has around 33 million individuals, representing around 43% of the country’s investable assets. However, only 18% of the mass affluent are estimated to have availed financial planning services.
Over half of the baby boomer population (those born between 1945-1965) is included in the mass affluent segment. Having accumulated significant wealth, this population is expected to require financial advice for retirement planning in the coming decade, presenting further opportunities for wealth management firms.
Firms are opting for new operational models in order to recover losses and compete effectively in the changing scenario. They are increasingly forming consolidations and focusing on client relationship management to retain clients and attract new assets. The retainer fee pricing strategy has also caught up, replacing the traditional transaction fee based model.
The report provides vital marketing information about the changing trends and the new opportunities in the wealth management industry. The briefing offers recommendations to wealth management firms intending to capitalize on the mass affluent segment. Intensive investor analysis by wealth and product needs will enable product development and provide a roadmap to the future of novel wealth management practices for the mass affluent segment.
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Strategy formulation
The section talks about current and future trends and addresses the key issues and opportunities in the wealth management industry in the U.S. It also focuses on product strategies adopted by leading players to tap the mass affluent segment. The section analyzes the key players serving wealth management, and discusses their market share.
Business model
The section talks about the various market strategies followed by firms in the wealth management industry. With the help of case studies, we have reviewed the various pricing and product strategies adopted by the key players.
Vendor analysis
The study provides an in-depth analysis of the vendors that support the wealth management industry. This will help firms select the most competitive service providers. Vendors are benchmarked across product complexity, features, and product and strategy development to help you make the best choice of service partner.
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Key questions answered
- How is the landscape of the wealth management industry changing?
- Who are the industry leaders and what are they doing to retain their position?
- How can you reposition yourself in the wealth management industry?
- What are the major drivers and opportunities in the market?
- What is the competitive outlook? What are the major tools and services? Who are the major players in the market segments?
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The recent economic crisis significantly decreased client trust in wealth management firms, resulting in a shift toward personalized services and safer products such as fixed income securities.
Global wealth by AUM increased by 11.5% in 2008 to $111.5 trillion in 2009; and is expected to reach $127.8 trillion by 2011. North America was the largest absolute gainer in 2009, gaining $4.6 trillion in wealth with a year-on-year growth of 15%, followed by Asia Pacific (excluding Japan), which gained by 22% or $3.1 trillion. The U.S. with AUM of around $31.4 trillion contributed around 90%-93% of the North American wealth management market in 2009.
The mass affluent in the U.S. includes 33 million individuals holding around 43% of the nation’s total investable assets. This segment offers an attractive opportunity for the wealth management industry as only 18% of the mass affluent have yet availed financial planning services.
Over half of the baby boomer population (those born between 1945-1965) is included in the mass affluent segment. Having accumulated significant wealth, this population is expected to require financial advice for retirement planning in the coming decade, presenting further opportunities for wealth management firms.
The wealth management firms include wirehouse, fully-disclosed retail brokerages, self-clearing retail brokerages, independent registered investment advisors (RIA), and online brokerages. Wirehouse constitute the largest market share of around 37%, and include top wealth management firms like Bank of America, Wells Fargo, Morgan Stanley, and UBS.
Fully-disclosed retail brokerage firms have a market share of around 19%, and include approximately 2,000 top firms such as Pershing and National Financial. Self-clearing retail brokerage firms have a market share of around 15%, and include top firms such as Edward Jones, Ameriprise, and Raymond James. Self-clearing retail brokerage firms registered an increase of 4.6% in client assets, after RIA with growth of 13.41% in client assets since 2007.
Registered Investment Advisors are the top asset gainers, with a growth rate of around 1.5% since 2008 and a current market share of around 12%. Top RIA custodians are Charles Schwab, and Fidelity Investment. Online brokerages are firms with self-directed investors; they have a market share of around 17%. Top firms in this segment include E* Trade, and TD Ameritrade.
Firms are opting for new operational models in order to recover losses and compete effectively in the changing scenario. They are increasingly forming consolidations and focusing on client relationship management to retain clients and attract new assets. The retainer fee pricing strategy has also caught up, replacing the traditional transaction fee based model.
Table of contents
Executive summary
1 introduction
1.1 Report Catalyst
1.2 REPORT STRUCTURE
2 Strategy Formulation
2.1 Market structure
2.2 Market sizing and segmentation
2.2.1 Global and U.S. wealth
2.2.2 Segmentation of U.S. householdS by wealth
2.3 Market share analysis , By private client assets
2.4 Market share analysis, by types of WEALTH MANAGEMENT firms
2.4.1 Wirehouses
2.4.1.1 Market share analysis of wirehouse firms
2.4.2 RIA Custodians
2.4.3 Self-clearing retail brokerage
2.4.4 Fully-disclosed retail brokerage
2.4.5 Online Brokerage
2.4.6 Comparison of firms by client assets
2.5 wealth management – Mass affluent segment
2.5.1 Financial institutions targeting Mass affluent segment
2.5.2 Strategies to attract Mass affluent segment
2.5.3 Winning model to taP Mass affluent segment
2.5.4 Mass affluent and Baby Boomer retirement Planning
2.5.4.1 Increasing share of Baby Boomers population
2.5.4.2 The Challenges in Targeting Baby boomers
2.6 Change in wealth management practices post financial crises
2.6.1 Change in client behavior & patterns post crisis
2.6.1.1 Clients are dissatisfied with current advisors
2.6.1.2 Clients shifting preference to safer products, forgoing margins
2.6.2 Change in customer offerings
2.6.3 increased focus on CRM
2.6.4 AdvisorS moving from wirehouse to ria
2.6.5 tightenED Government regulations
2.6.6 Change in Operational model
2.6.7 change in Technology
2.6.7.1 Outsourcing
2.6.7.2 Integration/Aggregation
2.6.8 transition to fee based approach
3 Case Studies
3.1 cASE STUDY: hilliard lyon
3.1.1 Objectives
3.1.1.1 About Hilliard Lyon
3.1.1.2 About SunGard Data Systems Inc.
3.1.2 Challenges faced by Hilliard Lyon
3.1.3 Overcoming the Challenges
3.1.4 Outcome of implementing sungard’s wealthstation
3.1.5 Conclusion
3.2 cASE STUDY: Northstar Systems International
3.2.1 Objectives
3.2.1.1 About NorthStar Systems International
3.2.1.2 About the client
3.2.2 Challenges faced by client
3.2.3 Overcoming the challenges
3.2.4 Outcomes to the Client
3.2.5 Conclusion
4 Vendor analysis and profiling
4.1 Vendor Benchmarking
4.1.1 Functional benchmarking
4.1.2 Tactical benchmarking
4.1.3 Benchmarking by customer segments covered
4.1.4 Wealth management vendor ranking
4.2 Vendor profiling
4.2.1 AdviceAmerica
4.2.1.1 Products and services
4.2.1.2 Recent developments
4.2.2 Advent software
4.2.2.1 Products offerings and services
4.2.2.2 Recent developments
4.2.3 InvestEdge
4.2.3.1 Products and services
4.2.3.2 Recent developments
4.2.4 Northstar System International
4.2.4.1 Products and services
4.2.4.2 Recent Developments
4.2.5 Sungard data systems inc.
4.2.5.1 Products and services
4.2.5.2 Recent developments
4.2.6 Thomson Reuters
4.2.6.1 Products and services
4.2.6.2 Recent developments
4.2.7 Xeye (Odyssey group)
4.2.7.1 Products and services
4.2.7.2 Recent developments
Appendix
list of tables
TABLE 1 financial institutions catering to mass affluent segment
TABLE 2 PROFIT SHARE OF VARIOUS PRODUCT CATEGORIES ($ billion)
TABLE 3 Baby boomers share in total U.S. population (2010 – 2030)
TABLE 4 Functional benchmarking of wealth management solution providers
TABLE 5 Benchmarking wealth management vendors, by customer segments served
TABLE 6 Market share and AUM on the basis of private client assets (2009)
TABLE 7 Market Share and AUM on the basis of private client assets (2008)
list of figures
FIGURE 1 Wealth management market structure
FIGURE 2 Wealth and population DISTRIBUTION OF U.S. households (2009)
FIGURE 3 HIGH NETWORTH INDIVIDUALS AND WEALTH (2005-2013)
FIGURE 4 MARKET SHARE ANALYSIS OF TOP PLAYERS (2008-2009)
FIGURE 5 MARKET SHARES OF WEALTH MANAGEMENT INDUSTRY SEGMENTS, BY CLIENT ASSETS (2009)
FIGURE 6 MARKET SHARES OF TOP WIREHOUSE FIRMS (2009)
FIGURE 7 MARKET SHARE OF RIA CUSTODIAN FIRMS (2009)
FIGURE 8 CLIENT ASSETS OF top FIRMS IN SELF-CLEARING RETAIL BROKERAGE (2007 – 2009)
FIGURE 9 MARKET SHARES OF SELF-CLEARING RETAIL BROKERAGE, BY CLIENT ASSETS and number of advisors (2009)
FIGURE 10 MARKET SHARES OF TOP ONLINE BROKERAGE FIRMS, by client assets (2007 TO 2009)
FIGURE 11 CHANGING SHARE OF INDUSTRY SEGMENTS (2008 TO 2009)
FIGURE 12 CLIENT ASSETS AND NUMBER OF FINANCIAL ADVISORS (2009)
FIGURE 13 TOTAL CLIENT ASSETS BY types of wealth management firms (2007 – 2009)
FIGURE 14 DISTRIBUTION OF WEALTHY HOUSEHOLDS AND THEIR RESPECTIVE WEALTH (2009)
FIGURE 15 FIRMS TARGETING MASS AFFLUENT SEGMENT
FIGURE 16 ACCUMULATION AND DISTRIBUTION OF BABY BOOMER ASSETS
FIGURE 17 CUSTOMER SURVEY: PREPAREDNESS OF WEALTH MANAGEMENT FIRMS TO HANDLE INFLUX OF RETIREE ASSETS (2009)
FIGURE 18 CUSTOMER SURVEY: A COMPREHENSIVE PLAN ADDRESSING LIFETIME GOALS (2009)
FIGURE 19 CUSTOMER SURVEY: INDICATING WEALTH MANAGEMENT FIRMS’ FOCUS ON RELATIONSHIP MANAGEMENT (2009)
FIGURE 20 CUSTOMER SURVEY: WEALTH MANAGEMENT FIRMS’ SATISFACTION WITH CURRENT TOOLS TO SERVE CLIENTS (2009)
FIGURE 21 sHIFTING CLIENT FOCUS TOWARDS SAFER AND TRADITIONAL PRODUCTS
FIGURE 22 ASSETS INVESTED IN WEALTH MANAGEMENT PRODUCTS (2007-2008)
FIGURE 23 CLIENT SATISFACTION INDEX OF WEALTHY HOUSEHOLDS
FIGURE 24 CHANGE IN WEALTH MANAGEMENT ADVISORS’ HEADCOUNT (2004 – 2008)
FIGURE 25 COMPARISON OF TOP BUSINESS OBJECTIVES OF WEALTH MANAGEMENT FIRMS (2009 AND 2011)
FIGURE 26 PREFERRED USE OF CRM FOR VARIOUS OPERATIONS
FIGURE 27 Demand for various wealth management solutions (2007 – 2009)
FIGURE 28 Comparison of various vendors on strategic aspects
FIGURE 29 Ranking of vendors offering wealth management solutions
Growth opportunities and latent adjacency in U.S. Wealth Management Industry