The growing amount of direct-to-investor assets might be a worrisome trend for financial advisors, according to a recent study from Cerulli Associates. In its Retail Investor Product Use 2013 report, the Boston-based analytics firm said that direct-to-investor assets have nearly doubled since 2008 and have outpaced advisor-intermediated investing.
Cerulli says that U.S. retail investors control more than $26.6 trillion in total addressable investment assets. The advisory channels collectively control the largest chunk by far with $15.4 trillion, with the wirehouse channel within that space leading the way with $5.2 trillion in assets. In comparison, direct channels represent just $4.3 trillion. But the direct-to-investor distribution models––mainly discount trading platforms such as Charles Schwab, Fidelity and E*Trade––have been transforming themselves from just go-to places for do-it-yourself investors into comprehensive advice providers across different wealth and service tiers. By Cerulli’s reckoning, these companies are providing legitimate competition to their traditional advisory peers.
“As direct providers add services, the distinctions between the direct and advisory channels may be unclear to the average investor,” Roger Stamper, senior analyst at Cerulli, wrote in the report.
Cerulli notes that recent trends indicate less reliance on traditional advisor relationships, which is supported by an increase in self-directed investors. The proliferation of available information on the Internet and the lingering concerns of the financial crisis have led more investors to conclude they don’t need the ongoing services of traditional advisors.
Cerulli contends that if traditional advice channels want to maintain their margins and market share (which, of course, they do), then they must reinforce the value of comprehensive planning and address the benefits of personalized advice while finding new ways to connect with emerging wealth.