While headcount at traditional wirehouses fell 1.5% from 2019 to 2020, four firms with national brokerage teams (Merrill Lynch, Morgan Stanley, Wells Fargo and UBS) saw their net assets increase by 12.7%, according to a recent report by Cerulli Associates. according .
According to the report’s authors, this is mainly because these firms are no longer concerned about rising numbers, but are focusing their advisors on helping them grow their business books and capture wealthy clients. Huh.
“What we’re seeing is Wirehouse is really a double-down on talent retention and organic growth versus recruitment,” said Marina Shtyrkov, an associate director at Cerulli’s Wealth Management Group. “Ultimately I think it’s a very specific strategy to work with advisors that specifically serve wealthy investors, and if that means losing a few advisors or not having the largest advisory force, then They seem to be fine with it.”
Cerulli says that wirehouses are actually 124% more productive than the industry average. The average wirehouse consultant has $198 million in client assets, up about 14% year-over-year, compared to $88 million for the industry average.
This is more than even the advisors of the largest registered investment advisory firms; Cerulli found that with an AUM of $5 billion or more in RIAs, advisors manage an average of $183 million.
“As the most productive channel, Wirehouse boasts internal resources, fully integrated workstations and designed teams that include multiple experts with global capabilities,” the Cerulli report said.
“Outside some niche B/D banks, and highly specialized RIAs and multi-family offices, this scale can be mimicked but rarely matched,” Shtyarkov said in a statement.
The Wirehouse has used its scale to remove barriers to productivity; Consultants identified the biggest challenges in the form of new customer acquisition, compliance, and management technology, Cerulli says. As a result, the Wirehouse channel boasts more mega teams than any other channel – defined as those with $500 million or more in AUM, accounting for 41% of the industry’s mega teams. This compares to about 20% for the independent RIA channel.
Overall, the wirehouse channel accounts for about 15% of total advisor headcount and 34% of assets, yet Cerulli projects that those firms will have about 13.5% headcount and only 28% of assets by 2025.
The Hybrid RIA channel was the fastest-growing channel in 2020, with an 8% increase in headcount and a 19.5% increase in assets, including market appreciation. Cerulli estimates that hybrid and pure RIA channels will account for approximately 31% of industry assets by 2025.