Financial Planners & Investment Advisors

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 46,000 portfolio management and investment advisory firms in the US provide investment advice, develop financial plans to meet client goals, and manage portfolio assets. A company may also act as a licensed broker/dealer or work with third party brokers/dealers, which sell financial or insurance products. Firms may specialize in a particular client base, such as high net worth individuals, nonprofit organizations, or corporate executives.

Competition from Alternative Sources

Portfolio managers and investment advisors compete with a wide range of alternative sources, including banks, securities firms, mutual funds, insurance companies, accountants, online-only services, and clients themselves.

Online Management and Advice

Online-only portfolio managers, financial planners, and investment advisors are a hot market, generating impressive account growth and attracting millions in venture capital.

Industry size & Structure

The average portfolio manager operates out of a single location, employs fewer than 5 workers and generates $13 million in annuial revenue. The average investment advisor operates out of a single location, employs fewer than 5 workers, and generates $3 million annually.

    • The portfolio management and investment advisory service industry consists of about 46,000 firms that employ about 496,000 workers and generate about $376 billion annually.
    • The portfolio management and investment advisory service industry is concentrated at the top and fragmented at the bottom; the top 50 companies account for over 55% of industry revenue.
    • Large portfolio management and investment advisory firms include Morgan Stanley, Fidelity Investments, Goldman Sachs, BlackRock, Charles Schwab, Vanguard, Edelman Financial Engines, Hall Capital, Chevy Chase Trust, Ameriprise Financial, and Lazard.
    • The industry includes national and regional firms, franchises, and independent operators.
                                      Industry Forecast
                                      Financial Planners & Investment Advisors Industry Growth
                                      Source: Vertical IQ and Inforum

                                      Recent Developments

                                      May 20, 2024 - Firms Increase Prices
                                      • Portfolio managers and investment advisors slightly increased prices during the first quarter of 2024, according to the US Bureau of Labor Statistics (BLS). Portfolio management and investment advisor industry employment and wages for nonsupervisory employees increased slightly during the first quarter of 2024, according to the BLS.
                                      • Artificial intelligence (AI) "...is simply nowhere near where it needs to be in terms of a stand-alone, say, investment advisor or a financial guru for individuals," according to University of Pennsylvania Wharton School of Business professor Michael Roberts. “It’s hard to not see [AI] as being central in one way or another to financial literacy, and financial practice, more broadly,” he said, “and it is a tool in the practitioner’s arsenal for addressing financial challenges.” Researchers at Virginia Tech and JPMorgan A.I. Research who recently examined how large language models like ChatGPT and GPT-4 performed in mock Chartered Financial Analyst (CFA) exams concluded “that ChatGPT would likely not be able to pass the CFA level I and II, under all tested settings.”
                                      • The most commonly cited investment goals of people surveyed by consumer research firm Hearts & Wallets were not directly about investing. Forty-eight percent pointed to building an emergency fund, followed by 43% who said they wanted advisors to help them plan financially for a vacation. Behind those goals were having enough money to work less when older (39%) and being able to stop work fully in retirement (32%). People cited investing goals such as generating current income, capital preservation and capital appreciation about as much as they said they wanted financial planning around buying a new car or buying real estate, at more than 20%.
                                      • An artificial intelligence-powered investment platform has been approved by the Securities and Exchange Commission (SEC) as a registered financial advisor, becoming the first non-human entity to be regulated by the federal agency under the designation. Investment management tool Portfolio Pilot was officially registered as an investment advisor with the SEC under parent company Global Predictions. Global Predictions CEO Alexander Harmsen says the company spent the past year-and-a-half building a compliance program for Portfolio Pilot – which he notes is "completely software" with "no actual human involved in the actual giving of advice, evaluating the portfolios, looking at markets," etc. – and submitted it as a registered investment advisor through the same process that human financial advisors go through. Portfolio Pilot uses a combination of AI and Global Predictions' proprietary Economic Insight Engine to provide information for retail investors. The portfolio management tool has more than 13,000 users and $6 billion in assets on the platform, according to Global Predictions.
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