The do-it-yourself scene isn’t just for arts and crafts or home renovations anymore.

Nearly one in three investors used self-directed, online brokerage platforms last year, and that’s up from just over one in five in 2019, according to a new study from Broadridge. The research found that advisors still court the bulk of investors, but their market penetration has fallen from 88% to 79% in the same time. That may sound like bad news for advisors, but the changes have less to do with assets moving out-of-house, and more about investors’ growing wealth and enthusiasm for playing the markets.

“The pie continues to grow, so the share of assets is getting bigger,” said Andrew Guillette, vice president of global insights at Broadridge. “Advice still reigns, and these aren’t worrisome trends.”

Myth Busting

While self-directed accounts gained plenty of popularity with the mass market and first-time investors during the pandemic, they’re not just a young person’s game. Across all income tiers and age groups — from your average Millennials to Boomer millionaires — investors are allocating funds to online brokerages. Advisors are actually encouraging their clients to have self-directed accounts that let them tap into alternatives, such as private real estate, equity, and credit.

“We’re big fans of self-directed IRAs for the right clients,” said Scott Bishop, co-founder of Presidio Wealth Partners. The key is to educate clients, so they avoid pitfalls like Unrelated Business Income Tax, which can sneak up on clients when they get involved with alternatives. “Done right, it’s a win-win,” he told Advisor Upside.

America’s Pastime. If they had to choose, the majority of investors with both an advisor and a self-directed account said they could envision their advisor managing all their assets, Guillette said. So why even bother with online brokerages? “The main reason is they just really enjoy it,” he said, with 45% of investors citing enjoyment as their top answer. Diversification, low-cost trades, and room to “play” with riskier investments were also top responses. The Broadridge data found:

• From 2019 to 2024, investors with $5 million or more in liquid assets increased their proportion of investments in self-directed accounts to 24.5%, up from just 15.5%.
• The median age of a self-directed account owner is 53, only a few years younger than the average client of an advisor at 57 years old.

“These investors are savvy, smart, and engaged, and they want relationships in both camps,” Guillette told Advisor Upside.

There’s more to life than just the Big 3.

BlackRock, Vanguard and State Street have long dominated the asset management industry with the three largest exchange-traded funds in the world — namely, IVV, VOO, and SPY, respectively — weighing in at around $600 billion in AUM apiece. All told, the fearsome threesome accounted for a combined 74% of the entire equity ETF market last year, according to a US News & World report.

Independent advisors’ collective response? “Meh.” That’s because new issuers actually gained market share last year among RIAs, who were looking for niche funds to diversify their holdings, according to an annual analysis from AdvizorPro. While BlackRock still topped the charts, the fastest growing newly launched funds were from issuers like Neos Funds, VanEck and Pacer, and focused on active management and factor-based strategies.

It shows advisors are outgrowing their plain, vanilla funds and are more savvy wielding complex ETF instruments. “The largest issuers like iShares, Vanguard, and SPDR still dominate, but given their size, they naturally have less room for rapid growth,” said Michael Magnan, chief executive of AdvizorPro, adding that over half of ETF positions in portfolios changed in 2024. “Advisors are adding ETFs and actively reshuffling and fine-tuning portfolios as market conditions shift.”

Engaging Warp Drive

While the Big 3 aren’t going anywhere soon, asset managers like JPMorgan, Dimensional, and First Trust are steadily gaining ground, according to the report that leveraged 13F filings to analyze holdings at 4,768 RIAs. The research also found:

• Some 667 new ETFs appeared in RIA portfolios for the first time in the fourth quarter of 2024, meaning advisors are searching for more innovative and niche strategies.
• Despite higher fees, income-focused and options-based ETFs are attracting advisors seeking yield and downside protection in volatile markets.
• More established asset managers are also seeing upticks in adoption with JPMorgan’s JGRO (97.1%) and T. Rowe Price’s TCAF (84.9%) topping the growth charts last year.

“The innovation in ETFs is moving at warp speed,” Magnan said. “For advisors, this shift means more choices and greater flexibility.”

Pick Your Own Adventure. Defined outcome ETFs, also known as buffer or target outcome ETFs, use options to offer downside protection in exchange for capped upside and were big hits last year. Advisors often put their retired clients into the funds to calm any fears over market sell-offs, Magnan said.

Income-focused clients can also benefit from options strategies that are designed to generate higher levels of income. Alternative ETFs, like commodities and managed futures, are also picking up steam as advisors look for ways to hedge inflation and diversify beyond stocks and bonds. “It’s pretty clear in our analysis that RIAs are viewing ETFs as an integral key to how they are building and managing portfolios,” he said.

Ritholtz is feeling fintech startups.

Media personality and Ritholtz Wealth Management CEO Josh Brown invested in the AI-powered lead generator and marketing platform FINNY last week and joined its advisory board. Not to be outdone, Ritholtz director of research Michael Batnick announced Monday the launch of a new fintech, called Exhibit A, that will provide advisors with financial charts and data. They’re the latest moves from high-profile executives into the quickly evolving world of wealthtech.

“Any success I’ve had backing wealthtech has been due to betting on the right people,” Brown told Advisor Upside.

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