Plus: Answers to questions posed for 2024.

Can Robinhood become a major advisory player?
The online brokerage firm threw its hat in the RIA ring this year with its $300 million purchase of RIA custodian TradePMR. Would-be young buck challengers to industry leaders Charles Schwab and Fidelity Investments, on the retail side at least, include Betterment and Wealthfront, who have subsequently scaled back their ambitions.

Robinhood, whose largest shareholder is Vanguard Group, wants to play the long game, hoping a combination of its technical prowess, young client base and ability to offer advisory firms referrals through its new custody business will eventually make them competitive with the legacy lions. Plus, they plan to introduce an AI-powered financial planning app in 2025. 

Will it work? Robinhood’s track record of missteps and run-ins with regulators suggests the company is more than capable of overreach. However, its marketing acumen and digital-savvy innovations demonstrate that Vladimir Tenev’s firm can be a formidable competitor. 

Game on!

Are sovereign wealth funds the new private equity?
There’s no doubt that private equity’s financial takeover of the big time RIA business is nearly complete. Advisors who bad mouthed PE ten years ago have had no problem taking heaps of private equity money over the course of the decade. RIAs with over $5 billion AuM who don’t have a private equity backer are few and far between.

But, as everyone knows, PE funds have a limited investment horizon. They keep selling to each other, but that can only last so long. Banks used to be big RIA buyers, but they’re on the sidelines. Insurance companies are rumored to be interested, but they haven’t stepped up to the plate yet.

At least one sovereign wealth fund has, however. The Abu Dhabi Investment Authority bought a minority stake in Fisher Investments, the largest RIA in the US this year, following up on their purchase of a 20 per cent stake in Canadian asset manager CI Financial’s US RIA business, Corient Private Wealth, last year.

Is Abu Dhabi a forerunner or an outlier? The argument for the former is that as some RIA firms now have hundreds of billions of dollars in assets under management , and are likely to consolidate, they’ve become big enough for sovereign wealth funds to make direct investments, disintermediating  private equity investors. 
Let’s see if anyone else joins the party in 2025.

What’s the next AI breakthrough?
Things change fast in this brave new world.

The T3 Tech conference arguably sets the industry standard for information on the latest fintech developments, but I don’t remember much, if any, discussion about AI note-taking apps at the conference in January. Yet by June Jump and other artificial intelligence apps that transcribe and summarize meeting notes with clients and then feed action items into CRM software were wildly popular among advisors. How long will it be before CRMs decide to provide the functionality for free?

“Early innings” is a hoary industry cliché, but when it comes to artificial intelligence, there hasn’t even been three outs in the game yet. We’ve all heard ad nauseum about how AI will help productivity, manage documents, process and analyze data, automate operation workflows, transform lead generation, and generate content, but mistakes are still common, regulation hasn’t been clarified, many risks remain and adoption has been spotty.

Nonetheless, the AI freight train that is barreling towards every advisor’s office will only pick up speed, and no one really knows what use case will emerge as the next big breakthrough. Some think AI generated customized services will threaten family offices’ UHNW lifestyle niche, while others believe automated AI investment and planning advice apps don’t bode well for traditional advisory firms.

Then there’s “agentic AI,” the latest iteration of artificial intelligence that doesn’t just react to human prompts but works autonomously and makes proactive decisions based on preset goals. 
Get ready!

Answers to questions posed for 2024
After stumbling in the public markets, can Focus Financial succeed as a private company? 
Yes.

The last two years were rough for Envestnet CEO Bill Crager. Will he survive 2024?
No.

After a bruising post-merger transition, can Schwab maintain its dominance in RIA custody? 
Yes.