By Cyril Tuohy
Although wirehouse advisors make up 16 percent of overall advisor headcount, they control 42 percent of all traditionally advised assets, according to a new report by Cerulli Associates.
The findings conclude that even though many advisors have left wirehouses in favor of the registered investment advisor (RIA) model in the past several years, the wirehouse channel will remain “the premier distribution opportunity” for financial services product providers.
“The wirehouse channel offers both the greatest opportunity and the greatest challenges for product providers,” Kenton Shirk, associate director at Cerulli, said in a news release. “As they constitute the lion’s share of advisor-directed assets, these firms are a strategic priority for nearly every asset management firm.”
The findings are contained in a report titled “Intermediary Distribution 2014: Optimizing Distribution Channel Resources.”
The survey results were compiled from more than 4,000 advisors working for wirehouses, RIAs, dually registered advisors, independent broker/dealers, bank broker/dealers and insurance broker/dealers.
In the wake of the financial crisis, independent advisor models have thrived, often at the expense of wirehouses beset by mergers and reorganizations.
Financial advisors who leave wirehouses say they prefer the independence of an RIA and can serve the clients more faithfully. However, an Aité Group survey released two years ago found that RIA advisors weren’t as satisfied with their careers as those in wirehouses.
Every month, it seems, brings news of financial advisors leaving big wirehouses — Bank of America Merrill Lynch, Morgan Stanley and Wells Fargo — to set up their own RIAs or to work for regional broker/dealers such as Raymond James or Edward Jones.
But the converse is also true. Many young college graduates begin their careers at wirehouses and grow their advisory shops under the wing of a powerful organization that offers fledgling advisors support, scale and the expertise that advisors never could have mustered on their own.
For wirehouses that lose dozens of advisors from one year to the next to independent channels or to competitors, the Cerulli report said that “the scale and resources of these firms assure they will be among the most significant distribution outlets to reach retail investors for the foreseeable future.”
Even when advisors “leave” a wirehouse, client assets frequently still reside within the industry’s largest distribution platforms, the report also said.
Shirk said that because of the concentration of assets under wirehouse control, mutual funds, insurance companies and other providers of financial products have become “even more focused on maximizing their returns of investment at each wirehouse.”
By implementing “portfolio specialist roles,” providers aim to increase the placement of their products on home-office-generated recommended investment lists, “which heavily influence advisor investment decisions,” he said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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