Wall Street’s big banks are stepping up their wealth management efforts, intensifying competition with traditional retail brokerage firms and fintech upstarts alike, said Fitch Ratings in a new report.
Recently, several of the large U.S. banks have made strategic efforts to expand their wealth management businesses in a bid to diversify their revenues and business models, “as margins across various segments erode and volume/scale becomes increasingly important,” the rating agency said.
For instance, Goldman is expanding its low-cost platform, Marcus Invest, beyond the firm’s traditional high-net-worth client base.
“It will initially offer checking accounts to gain retail client relationships, as seen with more traditional banks and retail brokers,” Fitch said.
At the same time, Morgan Stanley has sought growth via acquisition, such as its buyout of E*Trade in 2020 and Solium Capital (an administrator of employee stock plans) before that.
Both moves were made “to further expand its wealth management business,” Fitch said.
Similarly, a couple of other large Wall Street banks, JPMorgan and Bank of America, “have also built out their tiered wealth platforms from private client segments to more mass/mass affluent customers,” Fitch said.
“These businesses are platforms to deepen mass/mass affluent client relationships to generate more profitable returns.”
Looking ahead, Fitch expects increased competition between big Wall Street firms and traditional retail brokers — such as Charles Schwab and TD Ameritrade — and upstarts like Robinhood.
This tussle “will fuel the need for further investment in online/app-based platforms and likely result in further consolidation in the industry as scale plays an increasingly important role,” Fitch said.