Wall Street’s discount and traditional brokerages are very slowly losing ground in the wealth management industry as independent broker-dealers increasingly nip at their heels, according to a new Cerulli Associates
Discount brokerages like Fidelity Investments, Vanguard and Charles Schwab and traditional wirehouses like Bank of America’s Merrill Lynch still rule: They account for four of the five largest broker-dealers as measured by total assets under management, Cerulli’s U.S. Broker/Dealer Marketplace 2021 study says. But the
The consolidation of independent broker-dealers, or IBDs, is being fueled by
To that point, the number of registered wealth management-oriented broker-dealers declined to 923 last year from 1,284 in 2010, as smaller firms drop their registration to join a competitor or pivot to operating as an independent registered advisory firm (RIA) or hybrid advisory firm with brokerage services.
Size matters: Advisors at the five largest broker-dealers manage, on average, $159 million in assets —81% more than their peers, the report said. Nearly one in four, or 24%, of wirehouse practices are oriented to high net worth investors with more than $5 million in investable assets, “significantly higher than the industry average and highest among all advisor channels,” Cerulli said. As a result, wirehouse advisors are “the most productive in the industry.”
The transformation of the industry toward a fee-based model means that broker-dealers that can compete for and win high-performing advisors while developing the next pipeline of talent as ageing brokers retire “will be best positioned for growth,” Cerulli said.
Nearly four in 10 advisors at broker-dealers, or 37%, anticipate retiring within the next 10 years, the report said. While the industry is expected to recruit 15,298 rookie advisors into the industry, more than three-quarters are expected to fail within the first three years, it added.
