Yield of Dreams

Live From Tiburon: Is a Self-Serve Revolution Upon Us?

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Chip Roame, managing principal of Tiburon Strategic Advisors, made a bold prediction today at Tiburon’s 22nd annual CEO Summit in New York: The self-serve channel is booming. Roame predicts that in 10 years, the number of discount brokerage branches and the number of bank branches will reverse themselves.

He expects bank branches to virtually disappear, and they’ll be replaced by small kiosk-type discount branches. Why? “Because where you need help and advice in person more is investment advice. It’s not in banking anymore,” Roame said.

Roame gave his keynote industry address this morning at the Ritz-Carlton in Battery Park. During the presentation, he said the financial services industry is stumbling all over itself at a time when consumers are losing money.

And clients are more skeptical of the financial services industry, post-2008, Roame said. For example, three-fourths of consumers think Bernie Madoff behavior is normal. “That’s frightening.”

At the same time, since the market meltdown clients have become more sophisticated and want to be more involved. This means they’re more inclined to manage their investments themselves, Roame said.

There are 50 discount brokerage firms, five of which have all the market share, Roame said. The top five firms include Fidelity, Scottrade, Charles Schwab, TD Ameritrade, and E-Trade. Just to illustrate how big the space is, Roame said Schwab has about $1.7 trillion in client assets, including in its RIA business and discount brokerage business. If you separate out its discount brokerage business, it’s the size of UBS.

But will discount brokerages really overtake the banks? Banks, after all, have a market capitalization of $29.5 trillion, more than insurance companies, brokerage firms, and asset managers combined, according to Tiburon data.

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Casting a gimlet-eye on asset management issues.

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