A leading money management advisory firm challenges some prevailing wisdom: that many investment companies will have to merge to survive.
Investment banker Putnam, Lovell & Thornton predicts that investable assets will increase more than generally predicted, and that consolidation will not be as frenzied as is widely feared.
The report projects 13% annual growth for the U.S. money management industry through 2000, boosted by $3.6 trillion of fresh assets.
"In the past, the growth in the market has been consistently undercalculated," said Robert H. Smith, a Putnam Lovell vice president who wrote the report.
His 75-page study disputes the belief that consolidation in the industry will accelerate in coming years. Rather, it says, the pace will resemble that of the last five, when the total market share of the 100 biggest money management firms increased about 2% a year.
"There's no evidence of a massive consolidation," Mr. Smith said.
Instead of analyzing what types of products do well - as reports from Goldman, Sachs & Co., Sanford C. Bernstein & Co., and Smith Barney have done - Putnam Lovell looked at where the demand is coming from.
In "trying to forecast the product instead of the demand," Mr. Smith said, you don't learn "why people are buying the products."
Though his firm generates fees from advisory firms interested in buying or selling a money manager, Mr. Smith said his report wasn't meant to stir up business.
"We hope because we've done an honest piece of work, then people will come to us because we're smart, not because they're panicked," he said.
The report downplays the importance of the baby boomers - which it calls "notoriously poor savers" - and their much-anticipated inheritances.
A Cornell University study predicts that generation will inherit $3 trillion by the year 2010. But Mr. Smith pointed out that a big hunk of the equity to be passed on to the baby boomers is held in real estate, such as their parents' homes.
"Most of that money is invested somewhere," Mr. Smith said. "It's already intermediated. We don't see that as a large source of income."
Instead, Putnam, Lovell & Thornton suggests wealthy foreigners and foreign companies as target markets for American investment managers.
They represent "new wealth around the world seeking a home, a haven, and expertise," Mr. Smith said. "We believe that the money management services is a business that the U.S. can export."
