Products

Learn how to utilize our
products for your business

Use Cases

Learn how you can benefit
from our data solutions

Resources Get high-resolution data to cover modern assets

Investment Trends

Big Business: How Brokers Stack Up Where It Counts

Assets management (2)

There are so many brokers in the sea, but which is the one for thee?

For your customers, the choice might be simple — perhaps they’ll take their pick of a bonus when they choose your flavor of brokerage and start trading. But for fintechs and financial services firms, there’s really no picking and choosing when it comes to serving your customers. You’ll have to meet them where they are, no matter how flashy, ancient, gamified, boring, avant-garde, or Millennial it is.

Supporting dozens of brokerages in your app or financial product doesn’t come easy, either. Sure, they’re all finance apps — but while some brokerages are more like a Ferrari, others are more like a Model T, and neither are particularly easy to drive for the unseasoned investor.

That’s why we’ve built a middle-ground to ingest, interpret, and serve data from financial accounts — think of it as the Ford F-150 or Honda Accord of finance solutions. The Front API helps lending services, crypto companies, social trading communities, banking solutions, tax companies, and advisors collect and make sense of financial information from clients.

Offering emerging fintechs and finserv businesses these kinds of reliable solutions is our core mission. As we serve that information to firms building more informed and intelligent financial products, we have gained a lot of data on financial accounts connected through Front API which we can generalize, curate, and share insights about. We call it FrontIQ.

In this first-of-many series, we’re looking specifically at conclusions that can be had about large U.S-based broker-dealers — that’s your clients’ home base for trading equities, ETFs, and options. Let’s dive in to the research itself, starting with the value of assets connected:

High-Level Findings

  • 1. The figure below is sorted by Connected Assets Under Management (Connected AUM.) TD Ameritrade is the most valuable brokerage in our sample by more than 2x over, as measured by CAUM.
  • 2. The largest brokerage in our sample was Robinhood, which accounts for nearly 50% of all accounts connected to Front  — for some perspective, that’s over 0.3% of Robinhood’s entire userbase. We took a subsection of about 5,500 users who had an active balance.
  • 3. The highest Average Balance per User was Chase, arguably one of the most memorable names in traditional finance. Not far behind was Vanguard, a king of 401(K) plans, and TD Ameritrade.
  • 4. Average AUM/User was lower than publicly-addressed figures reported by brokerages, which can be partially ascribed to falling equity valuations. Another important consideration is that many users connecting in Front API are fintech natives, users with two or more brokerage accounts who skew younger and generally have lower balances.
Big Business: How Brokers Stack Up Where It Counts

Methodology

We have sampled a subset of over 10% of the total brokerage connections in the Front API.

Many of these connections come directly from the Front app, a consumer trading app which we created in the early days of our business which allows users to connect all of their brokerage and crypto accounts in a single place. However, it also includes generalized data from our dozens of B2B clients.

In many cases, users have connected more than a single broker to the Front API. So while we will generalize our findings, take the dollar averages with a grain of salt. Another consideration that weighs heavily in that disconnect is that many users connecting in Front API are fintech natives, users with two or more brokerage accounts who skew younger and generally have lower balances because of a lack of savings.

Conclusions

There are plenty of conclusions you can draw from Front API data. Just at a glance: it’s clear that legacy players have maintained their lead in terms of Assets. However, there’s some other stuff that doesn’t meet the eye at first. Let’s dive into some of the conclusions from our sample, as well as our entire API dataset.

Legacy Players Remain Asset and Average AUM Leaders

Let’s start with the most obvious conclusion from the Front API data: the legacy players are still squarely in the lead.

The legacy partners in our sample report managing over $20 trillion. However, what is “under management” generally includes money managed in mutual funds, ETFs, and other financial products. This is why players usually preference the Assets Under Custody (AUC) figure in the brokerage business. However, many brokerage companies generally point at their AUM because that’s their biggest profit-driver.

In our sample:

  • TD Ameritrade ranked #1 in terms of connections with more than $100 million in AUM.
  • • Fidelity and Schwab weren’t far behind at #3 and #4. 
  • Naturally, it was the legacy players who were king in the Average AUM/User Chase, Vanguard, and TD Ameritrade. The non-legacy institutions had significantly lower AAUM/User.

Ready to offer users a detailed view of aggregated assets? Get Started with Front Account Aggregation. 

Fintechs Have Some Volume. Could the Average AUM Follow?

More than 40% of brokerage accounts connected to the Front API are Robinhood accounts — or 0.035% of the entire Robinhood userbase. Our sample features a subset of about 5,500 active accounts which have at least a $10 balance.

However, many of the connections in Front API lay dormant now. A small portion of fintech users in Front API make up the majority of the holdings. In Robinhood’s case specifically, we found that the collective AUM of the more than 80,000 connects was just under $700 — which is significantly less than Robinhood’s own reported AUC average of $3,100 (the AUC average is $5,338 if you just average it just among monthly active users.)

The case is also applicable for other fintechs. Over 80% of connected assets from WeBull are owned by 20% of users; a few hundred users who connected an M1 Finance account represent over 95% of its AUC among Front-connected users. Some of that can be attributed to larger deviation when the user sample is smaller, but these findings support that there’s a Pareto-esque distribution among fintech users.

There are a few factors which weigh heavy in this: 1) the Front API users are likely to be fintech natives; 2) a large volume of users might have signed up for broker-dealers to take advantage of churning bonuses and then withdrew their funds; or 3) fintechs are more likely to have a large volume of users with a lower overall AAUM/User.

A question that arises from the third conclusion is: can fintechs catch up in terms of average AUM? Assuming users in new-age, fintech-oriented brokers skew younger and have years of productive earning potential ahead of them, the answer is a resounding yes.

Conclusions on the Brokerage Battle

In 2019, Charles Schwab announced it would acquire TD Ameritrade in a $22 billion deal. That had the makings of unprecedented consolidation in the industry. Consider this: Schwab and TD Ameritrade in our sample would represent over 61% of connected assets. That’s not generalizable to its market share in the industry at-large, but it is indicative of just how pervasive it is among a subset of highly-online, fintech-loving, digital-first traders and investors.

The industry looked prime to move towards consolidation after Robinhood disrupted the commission-based trading model. Then the COVID-19 pandemic, the rise of retail investing zeitgeist, and other cultural factors redirected the broker-dealer industry. Once on a trajectory of consolidation, the industry is now filled with dozens of fintech brokers, modeled largely after Robinhood — and they’re all deliberately designed for a new design-conscious, entry-level investor in mind.

Legacy players are squarely in the lead when it comes to assets under their purview, as well as the sheer value per user account. Another significant consideration affecting that value amount is the number of 401(K) plans managed at Fidelity and Vanguard, plus the number of wealth planning options at banks like JP Morgan-Chase. However, over time, there is the possibility that fintechs will expand their footprint and impact in the industry.

Ready to offer users a detailed view of aggregated assets? Get Started with Front Account Aggregation. 

Get in Touch Today.

This material is a simulation of a conversation on Front and not intended as investment advice nor is it meant to suggest that any securities are suitable investments for any particular investor. Investment advice is only provided to Front customers. All investments are subject to risk and may lose value. Past performance does not guarantee future results.

Front does not rebalance portfolios or otherwise manage the Personal Portfolio Account for Clients on a discretionary basis. Each Client is solely responsible for implementing any such advice. This investment recommendation relies entirely on the responses you’ve provided regarding your risk tolerance. Front does not verify the completeness or accuracy of such information. Investing involves risk, including possible loss of principal. No asset allocation is a guarantee against loss of principal.

All individuals featured on this website are paid actors or employees of Front. Front Financial Inc. (‘Front’) is an SEC registered investment adviser. Registration with the SEC does not imply a certain level of skill or training. By using this website, you accept our Terms of Use and Privacy Policy. Front’s investment advisory services are available only to residents of the United States in jurisdictions where Front is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities. Any historical returns, expected returns or probability projections are hypothetical in nature and may not reflect actual future performance. Account holdings are for illustrative purposes only and are not investment recommendations. The content on this website does not constitute a complete description of Front’s investment advisory services. View a full list of available investments on Front. Front does not provide financial planning services to individual investors. Before investing, consider your investment objectives and your broker’s fees and applicable custodial fees. Front Financial, Inc. is a digital financial services company offering financial products for U.S. based consumers. Front is not a bank or depository institution licensed in any jurisdiction. Advisory products and services are offered through Front Financial, Inc. Products offered by Front Financial, Inc. are Not FDIC Insured, Not Bank Guaranteed, and May Lose Value.

For more information, see our Investment Adviser Public Disclosure with the SEC. All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

Information provided by Front Support is for informational and general educational purposes only and is not investment or financial advice.

See Front’s Terms of Service and Privacy Policy.

See Google’s Privacy Policy here.

Google Play and the Google Play logo are trademarks of Google, Inc.

Apple, the Apple logo, and iPhone are trademarks of Apple, Inc., registered in the U.S.

© Copyright 2022 Front Financial, Inc. All rights reserved.

This website uses cookies. By continuing to view our website, you acknowledge and accept our Terms of Service and Cookie Policy. You can control and/or delete cookies as you wish – for details, see aboutcookies.org. You can delete all cookies that are already on your computer and you can set most browsers to prevent them from being placed. If you do this, however, you may have to manually adjust some preferences every time you visit a site and some services and functionalities may not work.

Accept and continue