Wirehouses Lost 8% Market Share Over Past Three Years

Wirehouses have lost headcount and asset share even as the average assets under management per adviser in the channel has risen, according to a new report released Friday from Cerulli Associates.

“Wirehouse firms lost 8% asset market share during the past three years and we forecast them to experience a decline of 6,800 advisers during the next five years,” said Scott Smith, head of Cerulli’s intermediary practice. “In turn, we expect independent advisers to increase their headcount share by more than 3% during that timeframe, as [independent broker-dealer] and [registered investment adviser] channels assume the wirehouse losses."

The one silver lining for the wirehouse firms is that wirehouse adviser average AUM increased to $94 million in 2010 from $84 million, Cerulli stated. The research firm said that growth showed “initial success at increasing profitability as these firms trim lower-end advisors.”

For asset managers, Cerulli concluded, this means that there will be greater assets managed by a smaller number of advisers. That, in turn, “allows for greater wholesaler focus on top producers,” Cerulli said. “The move upward to serve a higher-net-worth clientele also creates changes in product demand that are critical for asset managers vying for shelf space. Access to alternative investments through mutual fund and pooled investment vehicles are necessary to serve the desires of these firms’ evolving clientele,” the research firm added.

Bing Waldert, head of Cerulli’s retail practices, said that as a result “firms should expect increased competition among advisers as manufacturers fight for distribution amid shrinking numbers. Asset managers struggling with placement on wirehouse product lists might reconsider whether the channel is the best recipient of their dollars and manpower.”

Frances McMorris is the editor-in-chief of On Wall Street.

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