This brief post was inspired by some news which “hit the tape”.

“Interactive Brokers reports 53% growth in March DARTs Ending client equity of $330.6B (+106% Y/Y); ending client margin loan balances of $42.2B (+113% Y/Y); ending client credit balances of $84.5B. The company reported 1.33M client accounts (+74% Y/Y, +5% M/M)”

That was the headline that went along with Interactive Brokers earnings release this past week. A “DART” is a metric for measuring growth much like “same store sales” – DART stands for Daily Active Revenue Trades…basically the trades which make money. Isn’t it interesting that that is now a way to measure earnings – back “in the day” every trade made money…and firms made more money in some areas than others…think Wolf Of Wall Street 

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So blow out growth is accompanying online trading as well as roboadvisors.

“By 2030, 80% of heritage financial firms will go out of business, become commoditized or exist only formally.”

The growth of the RoboAdvisors this past decade has been astonishing. The RoboAdvisors assets under management collectively are projected to surge past earlier estimates of $1.5 Trillion. As expected, given that they have been in asset management for decades, Vanguard & Schwab sit atop the Robo Advisor Kingdom at numbers 1 & 2 – (which don’t even count because they’ve been in the asset management business for decades) what’s even more remarkable is that the “Robo” components of numbers three, four and five were all launched in just the past decade they are respectively Betterment (est 2012), Wealthfront (est. 2013) & Personal Capital (est. 2012). Vanguard & Schwab have had to pivot several times over several decades to change course with the ever changing moods of the investing public, the money flows,and market dynamics…. but given their sheer size (as well as billions in cash on their balance sheets) entering the Robo space was manageable. It is important to note that both Vanguard & Schwab started as Clearing Firms/Broker Dealers as their foundation with their DNA being rooted in money management – Betterment, Wealthfront & Personal Capital all had some sort of ties to the Capital Markets but when the RoboAdvisor components were launched they registered (at that decision point) as a Registered Investment Advisor (R.I.A.).

Since the top five were officially launched every firm, every bank as well as some derivatives (i.e. Acorn & Robinhood) have taken the playbooks and started their own RoboAdvisor. The space has become extremely crowded but there is plenty of room – since Covid the predictions of the RoboAdvisor asset growth are being drastically readjusted. The chart below shows $2.5 Trillion for assets in the Robo space by 2023 – in reality it will most likely be over $3 Trillion.

Ok so Robo’s, and online trading are exploding in growth…

sidenote I am NOT a fan of Robinhood. The fact that the only way they make money is by selling the customers order flow to firms like Citadel is at a minimum unethical and full of conflicts and in my mind is borderline criminal. For this Robinhood is valued somewhere in the range of $20-40B while they are under investigation?

For those involved in Wealth Management you must read the report put out by PWC about what the future looks like – Its both fascinating & frightening.

Here is another article – About Advisors Needing To Face Tech Or Face Extension