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February 7, 2022

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While wirehouses’ rosters and market shares shrank, their advisors’ productivity, as measured by assets under management, grew year over year by 14.4% to $198 million per advisor, more than double the rates of other channels’ advisors, according to a report issued Monday by Cerulli Associates.

The wirehouses—identified traditionally as Merrill Lynch, Morgan Stanley, UBS Wealth Management USA, and Wells Fargo–are benefitting from a push to move upmarket and drive their sales force to work with wealthier clients and be more efficient through technology enhancements and specialized support services. Their in-house growth efforts are also paying off with better client acquisition, Boston-based Cerulli said.

 

 “Instead of vying for headcount, wirehouses have concentrated on solving these organic growth challenges,” wrote Marina Shtyrkov, a Cerulli researcher who drafted the report. “Wirehouses are playing to their strength and providing advisors with the tools they need to capture and grow wealth.”

The average assets per advisor across all channels was $88.1 million, according to Cerulli.

Outside of a few niche broker-dealers, banks and highly specialized advisory firms, the wirehouses’ “scale can be mimicked but rarely matched.” She also pointed out that wirehouses’ employ the lion’s share of so-called “mega teams”—practices with $500 million or more in AUM, with the channel accounting for 41% of such groupings in the industry.

But as wirehouses have been focusing on a group of more productive advisors, rivals are stealing brokers and market share.

Wirehouses have lost 6.2% in asset market share since 2010, the Cerulli report said. It projects the channel would cede an additional 6.5% by year-end 2025.

By that year, the Cerulli projects that 30.6% of the industry’s assets will be managed by independent and hybrid RIA channels, and 15.2% by national/regional broker-dealers.

The national and regional brokerages are “already overtaking the wirehouse channel in headcount share,” the report said, noting that they have captured 15.2% of the advisors, while wirehouses have 14.9%.

 National and regional firms “are successfully recruiting wirehouse teams by providing similar infrastructure, paired with greater choice and a more advisor-centric culture,” the report states.

But the report also stressed that the wirehouses have been putting in place changes, including teaming and more deferred compensation, to combat the flight. They also are promoting cross-selling, which deepens customer ties to the firm.

“They are adjusting compensation grids to increase incentives for advisors who broaden client relationships with multiple products and services,” the report said. “This complicates potential moves to other platforms by making client relationships stickier and less portable.”

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