What’s Next For Robinhood, Sovereign Wealth Funds And AI? Most Interesting Industry Questions, Part 2

In the second part of this two-part review, our US correspondent examines the questions most likely to be heard around the industry in coming months, and reviews how well some predictions turned out in 2024.

The first
installment of Family Wealth Report’s annual
compendium of questions most likely to be heard in the hallways
of industry conferences covered some of the advisory industry’s
highest profile executives. Part 2 looks at companies and themes
that will loom over 2025.

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 (like Fisher), 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 (see Robinhood above) 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.