Meanwhile, BlackRock is getting into the game by providing the technology to advisors in an effort to drive more assets into their ETFs, which keep getting cheaper.
This brings us full circle to the fee cuts. These firms — namely BlackRock, State Street, Schwab and Invesco — that actively participating in this self-mutilation ritual of cutting their own fees down to next to nothing — as well as trimming headcount and expenses — to keep up with Vanguard and satiate advisors will likely be rewarded in the future.
In a bear market, the move to low-cost passive will likely accelerate. Meanwhile, the bull market subsidy that has been supporting traditional asset managers will turn into a bear market tax that puts even more downward pressure on their valuations, thereby making them targets in what is likely to be an intense round of consolidation for firms with strong passive offerings, organic growth and diversified businesses. In short, these are the firms whose names will likely still be around in 10 years.
They may end up having the last laugh.
This opinion piece was provided by Bloomberg News.