Wirehouses have lost headcount and asset share even as the average assets under management per advisor 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 advisors during the next five years,” said Scott Smith, head of Cerulli’s intermediary practice, in a press release from the Boston-based research firm. “In turn, we expect independent advisors to increase their headcount share by more than 3% during that time frame, as [independent broker-dealer] and [registered investment adviser] channels assume the wirehouse losses,” Smith said in the statement.
The one silver lining for the wirehouse firms is that wirehouse advisor 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 advisors. That, in turn, “allows for greater wholesaler focus on top producers,” Cerulli said in its release. “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 advisors 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.”