Regional broker-dealers aren’t wirehouses, but they are still brokerage firms employing advisors who often practice in group offices. Thus, regional firm reps occupy a middle ground between wirehouses and independent financial advisor. As researcher Cerulli Associates put it recently, “Regional B/Ds can be considered to be the first step in a continuum of independence. Although regional B/D advisors are not, by definition, independent, they operate with more autonomy than their wirehouse brethren.”

At one point, that middle-of-the-road niche nearly spelled the end for the smaller firms. They were outmatched by larger wirehouses like UBS and Legg Mason who were buying them out and snatching up advisors at an alarming rate as the number of reps at regional broker-dealers plummeted from 36,691 in 2004 to 33,029 in 2007.

But now, in the midst of a resurgence, those ‘tweeners seem to be in a good place. As the nation fell under the shadow of the financial crisis in 2008, many of the larger banks were coping with cutbacks and rebranding. As a result, advisors and clients took another look at regional players, and the number of advisors at regional broker dealers soared to a peak of 38,249 in 2009 at a time when many firms’ headcount was shrinking.

“The resurgence of major regionals such as RBC wealth management, Baird, Janney Montgomery Scott and Stifel Nicolaus signaled that perhaps these firms had a space in the changing landscape of wealth management,”Cerulli reported.

In addition, from 2007 to 2010, regional broker-dealers’ share of AUM jumped from about 13% to 15%. Both investors and advisors seemed to like what they found when they got to the smaller firms.

One survey asked investors how satisfied they were with their primary provider. Among eight channels, “other full-service B/Ds” (essentially regional firms) got the most “satisfied” nods, getting thumbs-up from 74% of clients. Wirehouses were the lowest by far, with only 58% of clients saying they were satisfied.

Another poll measured advisor satisfaction at 17 different firms. Of the three regional B/Ds on the list, Edward Jones (first), Raymond James & Associates (fourth) and RBC Wealth Management (seventh) all scored well. “Most notably,” Cerulli points out, “there exists a gap between these three firms and the four wirehouses that bring up the rear of this ranking.”

They have been able to deliver higher results in large part due to their smaller annual recruitment goals. Because of their size and high turnover, annual recruitment at a wirehouse is often as high as the total number of advisors at some of the large regionals such as RBC Wealth Management, which has around 2,000 advisors, according to the report.

“While it is cliché, in a small firm, advisors feel more like a number,” the report stated.

Additionally, new technology has helped bridge the gap in resources. Software now affords smaller firms many of the same models and platforms of larger wirehouses, according to Scott Smith, associate director at Cerulli.

“Technology has played such a role in leveling the playing field. The wirehouses don’t have key differentiators anymore because just about everything is available on each platform,” Smith said in a phone interview. “The platform from one hedge fund manager can be just as good as another. If your firm doesn’t have it, you can buy it somewhere else.”

Other reasons for regionals’ rise cited by Cerulli include dissatisfaction with the wirehouses, advisors’ access to top management, congenial culture, and a focus on wealth management rather than investment banking.

Despite continued growth, Smith believes that regional broker-dealers are not in danger of becoming outsized.

 “They’ve been dealing with pretty rapid expansion pretty responsibly. Rather than increasing market share rapidly as they can, they’ve just raised minimums and seized on only the most compelling opportunities,” he said. “They recognize when their pipelines fill up.”