While head count in 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. According to associate.
According to the report’s authors, the main reason for this is that these firms are no longer concerned about rising head counts, but are focusing on helping their advisors grow their business books and capture wealthy clients.
“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 said 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; The consultants identified the biggest challenges in the form of new customer acquisition, compliance and management technology, Cerulli said. 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 advisory head count and 34% of assets, yet Cerulli projects those firms will have about 13.5% head count and only 28% of assets by 2025.
The Hybrid RIA channel was the fastest growing channel in 2020, with an 8% increase in head count 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.