In January, Tiburon Strategic Advisors, a market research and strategy consulting firm serving the brokerage and investment management industry, announced the release of its fourteenth research report on the future of the advice industry, titled The Future of Advice. The report summarizes Tiburon's broad views on the future of the brokerage, investments, private banking, and wealth management industries and represents the firm's first attempt at putting its views of the future into a single report.

Context Setting

U.S. households control over $17 trillion of investable assets and $46 trillion of total households assets. As the 76 million baby boomers enter the retirement phase of their lives, they will liquidate their 401(k) plans, sell their small businesses, and sell their large homes in favor of smaller, less expensive homes. This will present tremendous opportunities for financial professionals, as a large portion of these previously illiquid assets will become investable assets as they are rolled into IRA and other retirement-income-generating accounts. By 2010, Tiburon expects the value of consumers' investable assets to reach $30 trillion.

Within this context, Tiburon's Future of Advice report includes an overview of the advice industry, opportunities in consumer wealth, predictions on how the affluent consumer segment will evolve, four keys for product delivery in the future, and three keys for building successful advisory businesses.

Key Highlights

• U.S. households control almost three-quarters of all investable assets in the US, controlling over $17 trillion of investable assets and $46 trillion of total assets
• Baby boomers are the key to success for financial service companies over the next two decades; due to baby boomers' retirement, consumers' $17 trillion of investable assets should grow to over $30 trillion by 2010
• For example, the IRA rollover market is booming; Tiburon believes that annual IRA rollovers will reach $467 billion by 2010, pushing the IRA market to $5 trillion in assets
• The market, world events, corporate scandals, and industry stumbles have been troubling; only one-quarter of consumers believe their financial situations have improved since 2002; over three-quarters of affluent investors are concerned that terrorism will hurt the US economy; more than half of all mutual fund investors have a lower opinion of the mutual funds industry due to the trading scandals; and over three-quarters of investors indicated they would not seek services from a broker if they knew the broker was not required to act in their best interests in all aspects of the financial relationship
• The vast majority of advisors believe the future will bring more competition to the advice industry
• The most profound industry change is the movement to fee-accounts; Tiburon expects total fee-accounts' assets to reach $3.0 trillion in 2010
• Indexing and alternative investments are both booming as investors search for the best alternatives; Tiburon believes that index funds will continue to grow as a share of all dollars invested in mutual funds and that real estate investment assets could triple over the next decade as pension funds and other investors continue to increase allocations to this asset class
• The wealth management business has become the recognized high growth and high margin business; financial services industry executives believe estate planning is the key to winning in the coming wealth transfer
• Marketing has long been a huge opportunity in the brokerage and investments business as it has traditionally been a sales-driven business; less than 15 percent of all advisors have target markets
• Advisors can build great businesses by focusing on benchmarking data and best practice profiles; one of the most interesting findings is that the margins of independent advisors and the payouts to captive advisors are relatively equivalent at about 40 percent
• Independent advisors may dominate in the next decade the way banks, full-service brokers, and discount brokers have dominated in prior decades
• Banks will continue to be the primary buyers of other financial services firms though because they are the largest institutions, with the most capital

Tiburon has published 14 research reports, 100–300 pages in length, which offer detailed analyses of growing business segments; each is available for $2,500; these reports can be ordered by contacting Sarah Sage at ssage@tiburonadvisors.com or 415.789.2540.