Financial Advisor Magazine
April 2012 issue
Wirehouses Still King Of The Hill
Despite headlines about breakaway brokers and the ascendency of the independent, fee-based advisory model, the Big Four wirehouses are still holding their own.
According to Cerulli Associates, wirehouse firms remain the best-capitalized segment in the advisory industry, notwithstanding the hard times that have buffeted the group since 2007.
Those hard times have produced falling asset levels––wirehouses controlled 43% of industry assets in 2010, down from 50% in 2007. Cerulli expects their market share to fall to 35% by 2013.
But part of that asset decline is attributed to planned attrition as firms cut ties with less-productive and less-profitable financial advisors and focus on keeping more profitable ones. In other words, it appears they might be willing to give up some scale in return for higher profits.
“The most logical path to the future growth of wirehouses is through their largest advisor teams,” says Bing Waldert, director at Cerulli. “Not directly via organic growth, but rather by supplementing these teams with junior advisors in order to free the principal advisors to continue their focus on business development.”
But Waldert adds a couple of cautionary notes to this strategy.
- First, he questions where these financial advisors will come from if new advisors aren’t being hired.
- Second, cost-cutting that affects financial advisors’ businesses could cause them to leave a firm if they feel that they are not being adequately supported, he says.