Despite the painful headlines, government bailouts and predictions of a flood of advisors going independent, wirehouses have retained both advisors and high-net-worth assets and will continue to dominate this space, according to a new report by Cerulli Associates.
Cerulli’s report on “High-Net-Worth and Ultra-High-Net-Worth Markets 2009” says that while the market crisis should have been the ideal time for banks, trust companies, multi-family offices and regional broker-dealers to grab market share from wirehouses, it didn’t quite work out that way.
While multi-family offices and traditional private client groups did gain some market share, on the whole, clients were reluctant to make changes in the uncertain environment. Some firms in the space also faced their own issues, with JPMorgan Chase digesting Bear Stearns and Washington Mutual and Goldman Sachs converting to a bank holding company.
In 2007, wirehouses managed around $4 trillion in assets of high-net-worth individuals, while traditional private client groups managed $2.9 trillion, and multi-family offices managed $333.8 billion. Unsurprisingly in 2009, Cerulli estimates that assets in all channels have fallen, but wirehouses still dominate. Wirehouses manage an estimated $3.3 trillion in high-net-worth assets, private client groups manage $2.45 trillion and multi-family offices manage $314.9 billion.
Furthermore, Cerulli predicts that wirehouses will continue to prevail in this space for the next four years at least, while private client groups and multi-family offices gradually boost their market share.
Advisors who leave a wirehouse are also much more likely to switch to another wirehouse than go to a regional or independent firm. With the crisis in full swing in December 2008, of the 981 advisors who left a wirehouse firm, 76% of them went to another wirehouse, while only 6% went to a regional firm and 5% went to an independent broker dealer.
However, by June 2009, more advisors left the wirehouse channel altogether. Of the 1043 advisors that left wirehouses that month 19% went to regional firms and 20% went independent. Still, 38% jumped to another wirehouse, according to Cerulli and Discovery Database.