The Money Management Institute (MMI), the national association representing the $3.8 trillion managed investment solutions and wealth management industry, today released selected findings from a proprietary survey of industry growth trends published in its 2014-2015 MMI Industry Guide to Managed Investment Solutions – Trends and Statistics.
Among the key findings, assets under management in managed solutions are forecast to reach $6.7 trillion by year-end 2018, representing a five-year compound annual growth rate of 14 percent and an increase of 74 percent over the $3.8 trillion in assets as of September 30, 2014. All segments of the managed solutions industry are projected to continue to post positive asset gains and net flows, sustaining the upward trajectory seen since the end of the 2007-2008 financial crisis and providing evidence that financial advisors and their clients continue to embrace the discipline and objectivity of managed solutions.
Managed Investment Assets Projected to Reach $6.7 Trillion by the Close of 2018
Money Management Institute Releases Annual Industry Guide with Growth Forecasts
WASHINGTON, D.C., December 18, 2014 – The Money Management Institute (MMI), the national association representing the $3.8 trillion managed investment solutions and wealth management industry, today released selected findings from a proprietary survey of industry growth trends published in its 2014-2015 MMI Industry Guide to Managed Investment Solutions – Trends and Statistics.
Each year MMI develops an industry growth forecast that is based on a survey of sponsor firms that are MMI members conducted by Dover Financial Research. Respondents are asked to provide industry trend information and projected growth rates for five managed solutions market segments – Separately Managed Accounts (SMA), Mutual Fund Advisory, Rep as Advisor, Rep as Portfolio Manager and Unified Managed Accounts (UMA). The responses are consolidated into an aggregate industry forecast.
Among the key results:
Strong Industry Growth Projected through 2018
- MMI asked sponsor firms to provide a five-year forecast for 2014 to 2018, enabling for the first time projections that take into account 10 years of actual and forecasted data. Assuming no material shifts in the underlying capital markets, survey respondents forecast managed solutions industry assets under management of $6.7 trillion by year-end 2018, representing a five-year compound annual growth rate of 14 percent and an increase of 74 percent over the $3.8 trillion in assets at the close of the third quarter of 2014.
- The market share of wirehouses is projected to continue to slip as their asset growth rate lags that of the total managed solutions market, a trend reflecting heightened competition from other distribution channels.
- Independent broker-dealer (IBD) and third-party service providers are the most optimistic about long-term growth prospects, a result partially driven by the continued success of IBD Mutual Fund Advisory programs, as well as their emphasis on providing a variety of affiliation models which attract advisors and Registered Investment Advisers (RIAs) interested in greater independence.
Projected Growth Opportunities by Market Segment
- With the exception of UMA programs, all of the major segments are forecast to exceed $1.0 trillion by 2018. UMAs, which have the lowest current asset base at $325 billion as of June 30, 2014, have a projected compound growth rate of 24 percent through 2018. UMAs are seen as beginning to look more like Rep as Portfolio Manager programs as the silos between advisory program types break down. Looking ahead, UMAs are projected to either be part of the broader investment management solution or the solution. Either way, market share will continue to increase.
- Survey responses indicate that Rep as Portfolio Manager programs are poised for the greatest growth over the next several years with assets projected to reach $1.5 trillion by 2018, surpassing Rep as Advisor asset levels. In 2013, 36 percent of sponsor firms indicated that Rep as Portfolio Manager programs would offer the greatest opportunity for growth within the managed solutions sector. A year later, that figure has risen to 50 percent.
- Rep as Advisor programs will continue to experience declining market share as financial advisors opt for advisory solutions that give them greater control and more discretion.
- Given the deep and broad usage of Mutual Fund Advisory programs, it is expected that they will continue to grow at a healthy rate, but will not expand their market share because advisors will increasingly adopt Rep as Portfolio Manager and UMA programs for their mutual fund holdings.
- As platform consolidation creates product neutrality, solutions will be chosen based on merit rather than ease of access, a trend expected to benefit SMA programs. However, the market share of SMAs as a standalone segment is projected to decline as the shift to UMA programs and/or consolidated platforms continues.