Wirehouse Brokers Maintain Lead in Productivity Vs. Competitors–Study

Despite declining headcount and market share, wirehouses remain industry heavyweights as measured by the crucial metric of assets under management, according to a new report.

The average wirehouse broker at the end of 2019 managed $175 million in client assets, 124% more than the industry average of $77.9 million, Boston-based consulting firm Cerulli Associates said on Wednesday. In an earlier study, wirehouse advisors at yearend 2016 were managing 122% more than their competitors.

The average regional broker was managing $89 million at the end of 2019, the average

“hybrid” RIA advisor/broker oversaw $81 million, and the average independent broker managed $47.9 million, according to the study.

The widening wirehouse lead reflects a push by the big firms—Morgan Stanley, Merrill Lynch, Wells Fargo and UBS Wealth Management—to move upmarket in recent years by incentivizing brokers to work with wealthier investors.

The big firms have been spending heavily to help advisors grow household accounts and assets, and have unfurled numerous behavioral strategies, including building scale through teaming, that are “beginning to pay off,” according to Cerulli.

“Wirehouses have been making large investments in technology that can improve the efficiency with which advisors can operate their business and improve interactions with clients,” said Michael Rose, associate director of wealth management research at the consulting firm.

The Cerulli study compared wirehouses against “national and regional” firms, independent broker-dealers, insurance firms, registered investment advisors and bank-based broker-dealers.

The flip side of the good news for wirehouses is that their total market share of U.S. wealth assets is declining, according to the report.

The fastest market share gains are occurring at national and regional firms, which increased their share to 17% by the end of 2019, up from 16% three years ago and from 14% five years ago, Cerulli said.

The smaller firms are hiring advisors from their larger competitors to help fuel their gains, the study said. Headcount at the national/regional firms at the end of last year represented 14.9% of all U.S. advisors, up from 14.2% three years ago and 13.8% at the end of 2015, Cerulli said.

Brokers are gravitating to “less bureaucracy, greater autonomy over how to run their practices, and, in some cases, greater ownership over their books of business” at the smaller firms, the study said, but must contend with lower brand awareness and, in some cases, inferior technology.

RIAs have also been increasing market share and have become more competitive with wirehouses for serving wealthy clients as technology has improved. To improve retention, wirehouse executives need to address pain points, including simplifying “complicated and sporadically changing compensation grids,” according to the report.

Wirehouse brokers also have been complaining about falling levels of support, according to the report.

In one recent example, Carol Ann Wilshire said she joined “national” firm RBC Wealth Management last month from UBS Wealth Management because RBC agreed to support her hiring of two client associates. The Los Angeles-based wirehouse veteran said she was managing $280 million in client assets at UBS and producing $3.3 million.

“As wirehouses look to grow both the productivity and retention of their advisors, this is one potential area of investment that could pay significant dividends,” Rose said.