This publication’s US correspondent looks at what he considers are some of the most prominent issues for the wealth sector this year. 

After stumbling in the public markets, can Focus Financial succeed as a private company?
It appears that Clayton, Dubilier & Rice, Focus’ new private equity owners, has some big changes in mind, starting with consolidation. Merging Colony Group and Connectus was the first domino to fall, but how long will Colony chief executive Michael Nathanson stick around?

Look for Midwestern Focus-affiliated firms to be rolled into St Louis-based Buckingham Strategic Wealth, but that still leaves dozens of partner firms dangling in Focus’ current loosey-goosey non-centralized model. Meanwhile, Focus founder and former CEO Rudy Adolf is riding into the sunset with hundreds of millions of dollars. Nice work if you can get it!

The last two years were rough for Envestnet CEO Bill Crager. Will he survive 2024?
2024 looks like a make or break year for the embattled co-founder of the $5.4 trillion TAMP and financial services outsourcer. 

Thrust into the top job after the tragic death of his friend and partner Jud Bergman in 2019, Crager has been battling headwinds ever since. Setbacks spurred by the pandemic were followed by gains by competitors, cutbacks, layoffs and an exodus of top executives. Topping it off was the emergence of a hostile new shareholder critical of Crager’s leadership, activist hedge fund Impactive Capital, which forced its way onto two board seats this year.

The nadir may have come after the disappointing Q3 earnings report, when the company’s faltering stock performance prompted a UBS analyst to ask Crager if “something is broken” at Envestnet. To stem losses, Envestnet may have to sell off a once highly-touted (and expensive) acquisition, data aggregator Yodlee, at a steep discount. 

While the company has high hopes for new custody platform in partnership with tech savvy New Zealand-based FNZ, custody is a notoriously difficult and low margin business. Meanwhile, aggressive and well capitalized competitors are taking aim at Envestnet’s legacy markets. If Envestnet can’t regain its mojo, it’s hard to imagine that changes won’t be forthcoming.

After a bruising post-merger transition, can Schwab maintain its dominance in RIA custody? 
Following its acquisition of TD Ameritrade, Charles Schwab is the undisputed heavyweight champion of the custody market with over $7 trillion in assets. But the industry behemoth is hardly beloved by advisors. 

Converting around 7,000 RIAs who had TD client accounts to Schwab’s platform was a painful experience for many. And some would argue that the TD merger was more about expanding Schwab’s direct-to-investor retail business than taking over a very low margin (if not unprofitable) custody business that was servicing RIA firms below Schwab’s own target.

Competing directly (although Schwab denies it) with RIAs for clients doesn’t win many friends, which potentially leaves an opening for custodial competitors. Big questions for 2024: Can established rivals steal significant market share and can newcomers to the market make any headway?
Fidelity and BNY Mellon/Pershing seem secure in their top tier perch below Schwab. Next level competitors SEI, Altruist, TradePMR, RBC Clearing & Custody and Axos have the most to gain. IBD fixtures LPL, Raymond James, Commonwealth, and Cambridge are itching to break into the RIA market.

Robo advisor Betterment has been effectively targeting smaller RIAs and startup Innovate wants to do the same. And financial services powerhouses Envestnet and Goldman Sachs are putting considerable resources into their custodial launches. That’s a lot of competition for an 8 to 12 bps business!