Custom Portfolios: Power to the People

by Neil Katkov, PhD, April 30, 2002


Boston, MA, USA April 30, 2002

Technology is creating a revolution in the managed accounts market. Once the exclusive realm of private banking for the very rich, automated basket-trading and fractional shares technologies are making individualized portfolio services available at a cheaper price, lowering the minimum investment threshold and expanding the market to make portfolio investment services available to retail investors in far lower income brackets. In a new report, , Celent Communications examines this new market, providing an analysis of market segmentation, distribution channels, product types, and future trends.

Celent expects that over the next few years custom portfolio services will be integrated with a wide variety of financial products, including wealth management services, 401(k) programs, and variable annuities. Providing many of the advantages of traditional managed accounts at lower cost, the potential market for custom portfolios is substantial, especially if provided through investment professionals rather than direct-to-retail. Celent predicts that custom portfolios — including folios, fractional shares accounts, and online wraps — will reach US$113 billion in assets by 2006, a figure equivalent to 11 percent of the traditional managed accounts market.

"Some might see online folios as yesterday's news, a relic of the dot-com era," says Celent analyst Neil Katkov, author of the report, "but the best of the custom portfolio services have a real future, both in providing low-cost portfolio-based brokerage to the mass market, and in reducing the costs associated with administering higher-end online managed accounts."

A Table of Contents is available online.

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents


Boston, MA, USA April 30, 2002

Custom Portfolios:  Power to the People

Return to report Abstract


  Customer Segmentation 8
  Product Segmentation 10
  Distribution Channels 12
  Asset Growth 14
  Folios vs. Mutual Funds 16
  Regulatory Issues 17



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