Monthly subscription fees will emerge as a dominant payment method for wealth managers in the next few years, according to Charles “Chip” Roame, managing partner for Tiburon Strategic Advisors.
He said he disagreed with some conclusions of Tiburon members who were part of a report released Thursday, which he reviewed in a telephone press conference. The 311 Tiburon advisors said they feel a yearly fee will supplant charging on the basis of assets under management, which is still the most popular way of charging clients for most wealth managers.
Either way, wealth and investment management will remain a lucrative business, Roame said when he reviewed the report.
Roame outlined the trends that will affect the wealth management business in the next few years, including changes in fee structure.
He argues that advisors are ignoring the Gen X generation, born between the early 1960s and early 1980s, while concentrating on the wealth accumulated by baby boomers, who are rolling over retirement accounts, and the money being accumulated by millennials. Gen X should be the most important generation to the wealth management industry now because they will hold the most wealth in the near future.
“The view that gets lost is that Gen Xers now have the highest incremental growth in assets of all the generations,” he said.
Despite the enormous impact of the coronavirus on the markets, Roame said he feels the long-term trends shaping the wealth management industry will outlast the short-term disruptions being felt now.
“Assets are down and it is not pretty now, but I do not see any reason that assets do not come back and that long-term trends will not hold,” he said.
While the industry is still doing quite well, full-service, active wealth management is “being attacked by indexing, ETFs and robo-advisors,” Roame said. Whatever fee method is used by advisors in the future, it will have to be low cost to the clients. “Discount brokerage firms are in a great place today,” he added.
In the future, a large portion of active management will be focused on ESG and sustainable investing, Roame noted.
Although large firms with national presence are gaining ground, Tiburon advisors said there will always be a significant place for independent advisors.