Wirehouses to Lose SMA Market Share, Cerulli Says
December 13, 2010
Currently, wirehouse market share is at 56% of total fee-based managed account assets, but Cerulli Associates predicts that market share will tumble to 50% by 2014.
It's not that wirehouses won't continue to capture assets and grow, said Cerulli Analyst Patrick Newcomb. Regional firms, such as Edward Jones, and banks, such as Chase, are starting to gobble up market share as they build out their fee-based platforms. For example, Edward Jones launched a mutual fund advisory program in 2008 that had already built assets of $44 billion as of the third quarter of 2010.
Prior to expanding into the mutual fund advisory space, Edward Jones was a legacy transaction-based firm, Newcomb said. "When they launched this advisory program, it really was a huge hit among advisers who transitioned from commission-based mutual fund sales to a fee-based environment," he said.
Wirehouses still have the most robust managed account offerings for the different programs, such as mutual fund advisory programs, rep-as-portfolio manager programs, rep-as-adviser programs and unified managed accounts, because wirehouses are where these programs were created, he said. And these programs have been growing very quickly in the past year and a half despite, or because of, the downturn. But other firms, such as RBC Wealth Management, TIAA-CREF and Raymond James have caught on driving wirehouse market share down. In fact, the market share at wirehouses was as high as 70% of assets in 2001.
The solution for asset managers looking to gain distribution of their mutual funds, Newcomb said, is to identify regional firms or banks with fast-growing managed account programs in order to gain distribution within those channels.
"Much of the future of the channel depends on the success of the integration of the pending mergers and joint ventures, and the ability of the firms to retain and recruit advisers," Cerulli said.
Average 401(k) Participant Can't Retire Until Age 73
The average 401(k) participant needs to work until age 73 to be able to afford retirement, according to an analysis of 10,000 accounts by employee benefits consulting firm Nyhart.
Nyhart also found that only 19% of employees will be able to retire by the age of 65, and that employees above the age of 55 will need to contribute 45% of the salary to be able to retire by age 65.
"Across all age groups and income levels, the employees who contribute the greatest percentage of income have the best opportunity for retirement," said Thomas Totten, senior actuary and lead research for the study. "The decision of how much an employee contributes to their 401(k) far exceeds the importance of which investment funds they choose. By increasing your contribution by just 2% to 4% of total income, you can shave years off the age you retire."
85% Contribute to 401(k), Up From 81% in 2009
Contributions to 401(k)s increased in the last year, Principal Financial found in a survey of 1,159 employees and 529 retirees in October. Eighteen percent said they have increased their contributions, up from 13% that said they had done so in the fourth quarter of 2009.
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