Banks wave of the future, says FRC exec

Banks will not displace wirehouse channels, but will receive a larger share of growth and assets.
NOV 29, 2007
The biggest growth area in the next five years for distribution of investment products will be the banking channel, said Ian Rubin, senior vice president and director of retail investment markets & strategic advisory business at Financial Research Corp. of Boston. Banks will not displace wirehouse channels, but research shows that foundation is being established for banks to receive a larger and disproportionate share of asset growth and net assets, said Mr. Rubin at the FRC’s annual market trends conference which opened Wednesday in Boston. While the number of banks has decreased in recent years, assets have risen. In 1990, there were 15,000 separate banks, said Mr. Rubin. “Five years later there were 10,000 and as of June of this year there were 8,500,” he said. “Today there are $212 billion in assets under management in the banking channel. WE expect that by 2012, that total will double to $400 billion.” The collective deposits of banks grew from about $5 trillion to $7 trillion over the past five years, he added. “A lot of banks are focused on small business and private banking,” he said. “We’ve also observed in the media that for the first time banks have been recruiting brokers from the wirehouses. Banks are going after assets very aggressively.” The second channel poised for growth is the independent brokers. “We are forecasting increases in gross sales, net assets and asset accumulation for this channel,” said Mr. Rubin. Additional panelists pointed to other trends over the next five years. “There will be a greater focus on advice coming through the workplace,” said Luis Fleites, vice president, director of retirement markets at FRC. “As a result this will necessitate a rise of greater platforms for services offered to these plan sponsors.” Unified managed accounts will continue to grow at a healthy clip, said Owen Concannon, director of managed accounts and alternatives at FRC. “In the second quarter of 2007 there were $40 billion in assets in these programs,” Mr. Concannon said. “We expect that to grow to more than $200 billion by 2012, at a 33% annual growth rate.” As a result, new platforms will be introduced or upgraded. “In 2008, Smith Barney is launching two new UMA platforms,” he noted. UMAs will have an impact on portfolio management and ETFs will benefit more than any other retail product, said Mr. Concannon.

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