Asset Hungry Firms Paying “Whatever it Takes”

Monster sized deals are all over the Street, but the beast will be shot.

Monster sized deals are all over
the Street, but the beast will be shot.

Managed money fees squeezing firms profitability

Net new is the focus on the Street for firms trying to gain a profit edge. Monster deals are being offered to top teams who control their assets and have fee generating assets above 50bps.

Robo Investing an Interesting Benchmark

Just as Brokers woke up to find traditional banks in charge of wealth management companies, Brokers are now waking up to what is going on in the world of AUM. Robo investing seems to affect zero percent of high net worth Brokers, except that it’s being heavily promoted in mass media. Eventually, that trickles down to ultra high net worth private clients who are increasingly wondering why Vanguard’s S&P 500 fund at 30bps is so inferior to their managed portfolio. The result is an increasing pressure on fees, on assets in general, and on firms acquiring net new assets at any cost.

Unprecedented Movement

Right now we’re in the midst of a mass migration of top talent, mostly from foreign boutiques to big banks, American or otherwise. Boatloads of Brokers are vying for elbow room on some crowded vessels right now. This is a land grab on the part of big banks to make hay while the sun is out, and its ramifications, long term, are broad for any team whose exit plan may have included jumping ship. The death toll from this barrage will be high in the sense that acquiring firms will find some of their acquisitions to have holes in their boats while others are smooth sailing. The result will be an adjustment of economics to hedge bets and make smarter deals in the future.

What’s Next Trends

The trend is moving toward backroom deals to force a salesforce into subpar deals and it has never been more important to control your destiny, control your assets through portable products and to have and control your exit strategy. There is too much money in your kitty to let it dwindle under the auspices of corporate plans to sell away your book.

Assets are gold on the Street. Bidders for asset rich businesses right now are rich, but the players with real platforms are dwindling. If an exit strategy is in your plans, move quickly toward cashing in your assets.