Four financial advisory firms entered 2015 with more than $1 trillion in total assets under management (AUM) -- Vanguard, PIMCO, Capital Group Co. and J.P Morgan Asset Management. A fifth, Fidelity Investments, wasn't far behind at approximately $920 billion in AUM. Each of these companies arrived at the top of the list for different reasons, whether it be low fees and innovation (Vanguard), more than a century of dedicated financial management (J.P. Morgan) or great customer satisfaction (Fidelity).
American investors can choose from thousands of financial advisory firms. In fact, U.S. Money News estimates that, as of mid-2015, there were more than 16,000 listed asset management and investment advice companies in the United States. Of these, more than 7,500 were registered to offer financial planning services. The market is top-heavy, which makes sense; a well-known and well-respected name goes a long way in securing assets from families and businesses.
It's no accident that these companies are top dogs, and potential investors can find reasons to like each.
Vanguard has been a revelation in the investment management world, especially since the turn of the century. Much like Walmart in the retail sector, Vanguard became king of the hill through cheap prices and a huge variety of offerings. The company is famous for its low expense ratios on funds and passive investment management.
With $3 trillion in total AUM, Vanguard is far and away the largest advisory firm; no other company can boast even $1.75 trillion. The company lives by the mantra of lower prices and allowing investors to keep more of their returns, and customers have responded by flocking to Vanguard in droves. More than any other financial advisory firm, Vanguard has taken advantage of the Internet age.
PIMCO is a California-based management company with offices in a dozen countries. PIMCO, which stands for Pacific Investment Management Company, LLC, was launched in 1971 and eventually acquired by Allianz SE (ALV), a German firm, in 2000. The two companies operate as autonomous subsidiary and parent.
Like Vanguard, PIMCO has a very large offering of its own products. Unlike Vanguard, PIMCO markets to the entire spectrum of investors and not just on low-cost options. The company is active in rededicating its focus to changing market conditions, and it coined the term "The New Normal" after the financial crisis in 2008-2009.
Capital Group Companies
Capital Group Companies is better known by some of its individual investment management companies, such as American Funds and Capital International Funds. The company managed around $1.3 trillion in assets as of the first quarter of 2015.
The firm is arranged into tiers of subsidiaries, so investors and advisers often focus on only certain aspects of the total Capital Group package. Its lack of overall name recognition hasn't hurt it relative to its competition; a 2009 study concluded that Capital Group was the single most influential stakeholder in global stock markets.
J.P. Morgan Asset Management
Founded by the legendary John Pierpont Morgan, J.P. Morgan & Co. – now JPMorgan Chase & Co. (JPM) – is perhaps the most important private financial institution in U.S. history. The firm is the largest bank in the U.S. and one of the biggest financial conglomerates in the world.
It's no surprise that J.P. Morgan is among the top five largest financial advisory firms, given its track record and name recognition. Among its targeted advisory groups are other financial institutions, governments, pensions, businesses and individuals.
Fidelity Investments earned its name in the brokerage and mutual fund provider spaces. It's fitting that Fidelity – a word meaning loyalty, support and faithfulness – is one of the most highly rated investment advisory firms in terms of customer satisfaction and online support.