Wire Houses Lose Top Market Share Spot For The First Time

Friday, March 30, 2012 10:05
Wire Houses Lose Top Market Share Spot For The First Time

Tags: advisor industry people | bank of america | marketing | Wells Fargo

Wire houses are losing out in the competition for high net worth assets. Recent research by Cerulli shows market share dropping to 45% from a high of 56% in 2007. The trend has been developing for a good while but this is the first time wire houses have slipped from the number one spot.

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The number of wire houses has also dwindled. There are now only four—Bank of America Merrill Lynch, Morgan Stanley Smith Barney, Wells Fargo, and UBS. With Morgan Stanley trying to sell its Smith Barney unit, that number could soon become three.
Technological developments and changes in the marketplace are fueling the trend. Multi-family offices and independent RIAs are offering clients unbiased advice. They continue to attract clients as their focus increases on integrated wealth management instead of selling product.

Comments (2)

Lisa - I saw this report too and am bothered by the conclusions.

Cerulli Associates is a very respected firm research firm within the financial industry; however, their data and assumptions in this report needs greater scrutiny. It is revealed that ‘HNW is defined as investors with net worth >US$5 million, and UHNW >US$50 million. The report examines client demographics, vehicle usage, market sizing, distribution strategies, advisor retention, and technology trends. Data from this report comes from four separate surveys of asset managers that serve the HNW, HNW providers, CIO outsourcers, and bank trust providers.’

The timeframe which they are citing begs the question ‘did the accounts transfer from wirehouses or post 2008 fall below the $5million threshold?’ I wonder did Cerulli consider that Family Offices, Goldman Sachs Private Client, Bessemer Trust, etc who they claim are winning just actually have account minimums high enough not to have fallen below the $5million threshold in 2008-9?

A $7million dollar account that sinks 30% is under the threshold. A $10million or higher account that experiences the same loss is still defined HNW.

Let’s remember – 86% of all statistics can be made up!
brentb843 , April 02, 2012
Brent - I'm not sure about the parameters Cerulli used. High Net Worth can be--and is--defined in multiple ways. High Net Worth usually is defined either between $5 million and either $25 million or between $5 million and $50 million. Below $5 million is usually classified as "mass affluent."

I don't think the Cerulli report distorts the fact that many investors are disillusioned with the wire house model and are attracted by firms who adopt more of a family office model. This is a trend that has been going on for years. This study shows a tipping point because it is the first where wirehouses have lost the top spot.

What's interesting is that they lump private client groups into a group that is gaining along with the multi-family office and independent RIA group.

And I don't really think that stats from studies get made up, especially with a company like Cerulli. Research can be affected by many things, even by the way the questions are asked.

So I agree that one can find stats to support almost any position one wishes to take if that is what you are really trying to say. But that's a behavioral phenomenon called confirmation bias. It is very real and is not limited to investors.
lisagray , April 02, 2012

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