The erosion of the once-commanding wirehouse channel is both a challenge and an opportunity for independent advisors, new numbers from leading industry analysts at Cerulli reveal.
Cerulli crunched the numbers and found that the wirehouses have lost 7% of their once-commanding share of the industry over the last few years and are braced to shed another 8% in market share by 2013.
Most of those assets have gone to independent broker-dealer firms and RIAs as wealthy clients follow their brokers out the door.
Since 2008, the big four surviving firms of Wall Street -- Morgan Stanley Smith Barney, Bank of America Merrill Lynch, UBS, and Wells Fargo -- have let about 6,000 advisors go, and Cerulli expects another 6,800 to leave the channel in the next few years.
Only 20% of those departures will be voluntary, Scott Smith at Cerulli says.
The question is what happens to all those reps and their client relationships. Smith sees the RIA channel increasing its numbers 3% by 2013 -- a target that would require 8,200 warm bodies to achieve.
Traditionally, wirehouse reps gravitate toward regional broker-dealers, so there's no way all those people could come straight from the Big Four even if they were the kind of talent RIA firms want.
Most advisors forced out of the wirehouse are smaller producers, generating maybe $250,000 a year or less on AUM under $25 million.
So are the wirehouses simply going to dump thousands of people -- and their relatively small accounts -- into an industry that's already shrinking as the advisory business gets more efficient?
That's an opportunity for RIA firms willing and able to serve those accounts and take on those advisors. But for the rest, competition for the ultra-high-net-worth client gets tougher.
And if these 6,800 or so reps coming into the job market aren't a good match for the independent channel, where are independent firms going to find the talent they need to grow their businesses?