Breakaway Brokers Put $5 Trillion in Play

Brokers are continuing to rush for the exits of large brokerage firms to join independent firms, putting as much as $5 trillion in Americans’ retirement savings in play and prompting brokerage giants such as Schwab, Fidelity and TD Ameritrade to offer technological and business enticements.

The brokers fault the financial crisis as the main reason for their move, noting that if such a seeming behemoth as Lehman Brothers could collapse in a mere weekend’s time, there no longer is any real advantage to being at a large broker. On top of that, having been barraged with news of greedy bankers, many investors now view large brokerages unfavorably.

According to estimates by Cerulli Associates, brokers took an average of $188 billion in client assets from large B/Ds last year, and are on track to do the same in 2010. Large B/Ds have a market share of 48% and a total of 55,000 personnel, according to Cerulli. While independents’ share, controlled by 33,000 brokers, is only 19%, they are rapidly gaining and will achieve a 23% market share by 2012.

Analyzing financial statements from the top-tier brokerages, such as UBS and Bank of America, The Wall Street Journal estimates they lost $20 billion in client money last year via brokers leaving or dissatisfied clients.