Wealth Management Market Size
The U.S. wealth management market was valued at around $376 billion in terms of revenue, as of 2016. The U.S. market will likely grow at a rate of 4.4% in terms of NIA (net investment assets) between 2016 and 2021, in alignment with the overall growth rate for the North American region. Additionally, the U.S. will see an absolute growth of $5.25 trillion, in terms of NIA, between 2016 and 2021.
The high-net-worth segment (households with $1-10 million) have the largest share of the U.S. wealth management market at 42.6%. Globally, the "volume of net investable assets of high-net-worth individuals (HNWI+) will increase by around 25% to almost US$70 trillion by 2021," according to EY.
In terms of channels, the RIA channel, online brokerage channel and digital advice channel are the only channels expected to see growth in the coming years, according to an industry insider, Chip Roame.
In terms of business models, the holistic wealth management model is expected to overtake the market within the next ten years, gaining a share between 20% and 30% by 2025, while most of the other key business models will see significant declines as a result.
In order to fulfill your request, we relied on reputable industry reports which provided a robust number of insights on this topic, along with insights from reputable industry insiders. While we were able to locate a significant amount of insight which pertains to this topic, we were not always able to locate insights regarding breakdowns within the specific verticals you mentioned as examples (e.g. undeserved consumer segments, regional bank channels, broker-dealer firms channels, DIY business models, full service business models etc).
This is because, while a full deep dive of each of these breakdowns could likely reveal more specific data, we were not able to fully investigate each of these niche segments within the scope of a single Wonder request. However, given that you had only referenced these specific verticals as examples, we have included a significant number of insights that pertain to the market sizes and growth projections (as available) broken down by consumer segments, channels, and business models. The specific verticals that we did choose to focus on were those suggested as being the most relevant, according to the latest and most reputable industry reports and analysts.
U.S. market size of the Wealth Management industry
According to 2017 insights published by Autonomous Research, a "leading independent research provider on the financial sector," the 2016 market size of the U.S. wealth management industry was estimated to be around $376 billion in terms of revenue. There were around 124 million U.S. households participating in this industry, that collectively maintain investable assets worth $36.8 trillion, with investable assets being defined as "household net worth less illiquid assets such as residence and private company shares."
A 2018 report published by EY reported the following market size figures and projections for the North American market size in terms of net investable assets (NIA):
- $23.3 trillion in 2016.
- $26.6 trillion in 2019.
- $28.8 trillion in 2021.
Growth Rate of the Wealth Management industry
According to a 2018 global wealth management report published by EY, the U.S. is the leading growth market within the total global wealth management industry. Together, the U.S. and China hold a 45% share of the global wealth management market. The top five leading countries in this market are expected to make up "more than half of global NIA growth through 2021." Between 2016 and 2021, the U.S. market will experience an absolute growth of $5.25 trillion, in terms of NIA.
As a whole, the North American region will see the "largest growth in NIA." Through 2021, the North American region will have a growth rate of 4.4%, almost on par with the overall growth rate of 4.7%.
MARKET BREAKDOWN BY CONSUMER SEGMENT
Autonomous Research provides a very useful graph which shows the 2016 U.S. wealth management market size broken down by consumer segment in terms of ultra-high-net-worth, high-net-worth, mass affluent, emerging affluent, and retail market households. For your convenience, we have synthesized this data into a spreadsheet, which you can access here.
This spreadsheet breaks the data down by consumer segment and is broken out by overall revenue share of the market in terms of dollars, overall share of the market in terms of the number of households participating in the market, and overall share of the market in terms of total investable assets. Using this data, we have performed several calculations to determine the market share breakdowns of these segments in terms of percent. The calculations for these shares can also be found within the spreadsheet. Below, we have provided an overview of the consumer segments in terms of revenue market share.
As stated above, the U.S. wealth management market size in terms of revenue is around $376 billion, according to Autonomous Research. The market share breakdown of consumer segments are as follows:
- The ultra-high-net-worth segment (households with over $10 million) has a market share about 7.2%.
- The high-net-worth segment (households with $1-10 million) has a market share of about 42.6%.
- The mass affluent segment (households with $250K-$1 million) has a market share of about 23.7%.
- The emerging affluent segment (households with $100K-$250K) has a market share of about 7.9%.
- The retail market segment (households with less than $100K) have a market share of about 18.6%.
During our research, we did not come across many significant insights regarding the growth of these segments, as they pertain to the U.S. market. However, we were able to learn the following information:
- At the global level, the "volume of net investable assets of high-net-worth individuals (HNWI+) will increase by around 25% to almost US$70 trillion by 2021," according to EY.
- Baby boomers hold 93% of 401(K) assets, and are expected to maintain the largest market share throughout the next five years, and possibly longer.
- According to one industry insider, millennials are "irrelevant to the wealth management industry."
MARKET BREAKDOWN BY CHANNEL
In terms of channels, we did not happen to locate data on channels that pertain specifically to your given examples (i.e. wirehouses, regional banks, broker-dealer firms, private banks, registered investment advisors, discount / online brokers, and independent broker-deals firms). Despite this, we did locate some qualitative insights from a reputable industry insider, which we felt would be helpful for you.
Chip Roame of Tiburon has been working as a leading consultant in the wealth management industry for the past 20 years. He recently was a keynote speaker at the 32nd Tiburon CEO Summit. With regard to channels, Chip suggests that "the only categories with meaningful growth in the space will be the RIA channel, the online brokerage channel and the digital advice channel. Everyone else is losing share and these trends should persist."
Chip also makes the following observations:
- Around "500 successful wirehouse brokers make the move each year" from working as a wirehouse advisor and switching to an RIA, or starting their own RIA.
- Indexing and socially responsible investing (SRI) are expected to "see explosive growth" in the coming years.
- The U.S. market size for SRI is currently around $8.7 trillion, which is "almost entirely institutional," as SRI has not yet caught on within retail investing. However, Chip believes that this segment will grow in popularity among retail investors as "more people seek to align their values with their portfolios."
MARKET BREAKDOWN BY MODEL
In terms of business models, we did not happen to locate data on models that pertain specifically to your given examples (i.e. DIY, hybrid, assisted / full service, AUA (assets under administration) vs AUM (assets under management) vs fixed fee). Despite this, we did locate some very recent and relevant insights from EY which cover the most distinct business models within this industry.
While these are global insights, we have chosen to include them, given the insights above, which show that the U.S. and North American markets are on part growth-wise with overall global growth projections, and because these regions are the largest and fastest growing within the global market.
According to EY, the most distinct business models as of 2018 are: diversified product specialists, family offices, independent wealth advisors, boutique finance houses, traditional wealth managers and holistic wealth managers. EY states that the holistic wealth management model "is set to emerge in the not-too-distant future with the potential to affect all markets and create a lasting and deep impact."
In terms of assets under management (AuD), the following declines in growth across these business models will occur through 2025:
- Independent wealth advisors will decline 20%.
- Traditional wealth managers will decline 75%.
- Diversified product specialists will decline 40%.
- Family offices will decline 10%.
Holistic wealth management is expected to capture all of these lost shares, as this model is expected to grow significantly over the next decade. Within the global market, holistic wealth management will increase from close to a 0% share to a 20-30% share by 2025. Despite all the decline across the other models, boutique finance houses appear to remain relatively unaffected and unchanged. For the future, EY predicts that "the future business model focuses on the wealth manager’s technology and digital infrastructure, and is increasingly independent of the advisor."
In closing, we have conducted research into high-quality industry reports in order to gather insights on the U.S. market size and growth prospects of the wealth management industry. Additionally, we have provided available breakdowns in terms of consumer segment, channel, and business model.