The retail direct channel is on a path of continued marketshare gains as the needs and preferences of the end-investor shift, according to The Cerulli Report—The State of U.S. Retail and Institutional Asset Management 2024.

Cerulli’s research shows retail direct investor platforms grew faster than all other distribution channels from 2022 to 2023, posting a 22.2% growth rate or $2.5 trillion of asset growth. Factors include direct firms’ success in retaining 401(k) assets in IRAs on platform and the growing number of self-directed retail investors.

Overall, retail direct marketshare has grown five percentage points over the eight years trailing 2023. The channel is expected to grow an additional five percentage points over the next four years and could see a 10-point increase from 2016 to 2027. Meanwhile, wirehouses have lost four percentage points of marketshare since 2016 and are expected to lose another four percentage points by year-end 2027.

“The retail direct channel presents a consistent threat to advisor-intermediated channels as end-investors are increasingly educated and have access to high-quality investment products at lower costs than ever seen before,” says Matt Apkarian, associate director. According to the research, retail direct investor platforms control the largest portion of exchange-traded funds (ETFs) and mutual funds across all channels, although the channel lost some of its mutual fund asset marketshare in 2023.

Cerulli believes the role of the financial advisor must keep changing to prioritize offerings beyond just investment management. “Providers of products, technologies, and services to financial advisors must develop and market offerings that serve the changing needs of advisors who seek to slow the bleed from their advisor-intermediated channels,” he concludes.