Simple, web-based portfolio management tools have been proliferating over the past couple of years.
As reported recently by Bloomberg, companies such as Folio Investing, MarketRiders and Flat Fee Portfolios are providing subscription-based wealth management solutions that are largely automated and relatively inexpensive.
While low cost money management options such as index funds have existed for decades in the investment industry, these new offerings are essentially low cost, automated advisory services that lay on top of inexpensive asset management vehicles such as exchange traded funds.
It seems that financial advisors who are focused on investment management and asset accumulation may find it increasingly difficult to maintain a full-service fee structure for the mass retail market. As reported by Bloomberg, billions of dollars in recent outflows of assets from full-service brokerages could provide confirmation of this trend toward commoditization of investment advisory services.
A couple of related considerations:
- Concentration: To maintain margins, full-service advisors will likely be increasingly focused on the concentrated, high net worth segment of the market.
- Scale: the ability to thrive while serving the non-high net worth portion of the retail market will require scale, and web-based technologies are an increasingly important factor.
- Opportunity: The flipside of the commoditization of asset accumulation services is the very attractive opportunity that exists around asset decumulation or retirement income services. The decumulation side of the advisory business is where investment management was 40 years ago—it is new ground that is up-for-grabs, and the heavy lifting required to offer retirement income services should easily substantiate a full-service fee structure.
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