Independent Threat To Wirehouses Mushrooms
Independent broker-dealers have become an increasingly competitive threat to wirehouses and regional brokers, with more than $10 billion in revenues and 96,000 independent reps, according to a new study.
There are now more than 1,000 independent broker-dealers, according to Tiburon Strategic Advisors. "The independent broker-dealer industry has been getting stronger and independent broker-dealers have been gaining market share," according to the study, which also noted that independents maintained volume and profitability during the down market.
Noting that the industry benefited from consolidation in the 1990s, the study says the independent market has been focused on growing business and retaining clients. Recent stock research and IPO scandals probably have contributed to growth among independents, which depends on business from clients who are dissatisfied with wirehouses and regional firms.
The study found, for example, that 53% of independent reps' clients are people who were dissatisfied with their previous advisor.
Looking at the period covering 1995 to 2004, RIAs, independent reps and discount brokers have been gaining market share, mostly at the expense of banks and insurance companies, says Charles "Chip" Roame, managing principal of Tiburon. Full-service brokers, encompassing the wirehouse and regional firms, have remained relatively flat, he adds.
When looking at annual changes in client assets at the period studied, RIAs led with a 14% annualized growth rate, independent reps were second at 12% and discount brokers were third at 11%, according to Roame. Full-service brokers experienced a 7% growth rate, while banks and insurance companies saw annual client asset increases of only 4% and 1% respectively. "The bank and insurance space is so large that when they lose, the smaller guys can pick up a lot," Roame says.
Revenues for independent broker-dealers now total more than $10 billion, which is up 20% since 2001, according to the study. Industry revenues have grown from $8.2 billion in 2001 and 2002 to $8.6 billion in 2003 to $10.2 billion in 2004.
The data does not include Ameriprise Financial and other unknown small independents. Moreover, during the 2001-2002 period, wirehouses were experiencing 20% to 40% declines in retail revenues.
Industry executives continue to believe their chief selling points are unbiased research, nonproprietary products and a full range of investment choices, according to the study. Independents have also started to benefit from the fact that wirehouses and fee-only advisors continue to move up the wealth ladder. That, according to the study, has given independents room to serve clients at the middle and lower ends of the asset scale.

Seven Million Americans Working After Retirement
People are apparently doing more than talking about working after retirement. A recent study, in fact, says about seven million people have done it, and that's before the first of 76 million baby boomers reaches the age of 60.
The study, sponsored by Putnam Investments, says that about seven million previously retired U.S. citizens have returned to work after an average retirement period of one-and-a-half years. The "working retired," as the study puts it, now represent about 10% of the U.S. workforce composed of those at age 40 or more, according to the study.
The study also found retirees expressed different reasons for returning to work. Two-thirds of working retirees said they returned to work because they wanted to, while one-third said they did it out of economic necessity.
The study is based on responses from 1,726 retirees who are working. The estimate of seven million working retirees was arrived at through screening random samples of working people over 40 years of age.
"Our study shows retirement in the United States has already moved far beyond ending work at age 65, gold watches and early-bird specials," says William T. Connolly, head of retail management at Putnam. "For many, retirement is just a planned pause before resuming a career. These working retired are, by our estimate, now almost one-third of all American retirees."
The working retiree has an average age of 61 and an average household income of $87,000-which is 60% higher than that of traditional nonworking retirees. About 54% work part time, 36% work full time and 10% are looking for work.
More than half, 60%, still carry a mortgage with an average equity of 47%. Working retirees have average investable assets of about $400,000.

Retirement Income Association Is Formed
Noting the first baby boomer will turn 60 on January 1, financial service industry executives have formed a new group to focus on retiree income needs.
The Retirement Income Industry Association (RIIA) will focus on the financial and public policy issues related to the income needs of retirees, say its founders.
"Until now, Americans in their fifties have focused on wealth accumulation," says Francois Gadenne, president and CEO of Retirement Engineering Inc. and founding chairman of RIIA. "But as these Americans enter or prepare to enter retirement, they have to shift their focus and begin thinking about how to turn the wealth they have accumulated into secure retirement income."
The group is based in Washington, D.C., and will draw members from all segments of the financial services industry, Gadenne says. The group will serve as a think tank for analyzing retirement income issues and an incubator for the development of innovative retirement-income-related products and services, the group says.
The group lists its four priorities as:
Serving as a forum for senior executives in the financial services industry to share information and use their expertise to identify retirement income issues and develop solutions.
Providing information, training and educational programs to broaden the understanding of America's retirement income needs and the key components of retirement income planning.
Creating and maintaining a database of information on trends in the development and distribution of retirement income products and services.
Focusing attention on key retirement income issues and promoting products, services and policies that address them.

Most Americans Don't Know Investment Basics, Study Finds
Although Americans are starting to get the message when it comes to investor basics, many people are still lacking the "survival skills" necessary to build a retirement nest egg, according to a new study.
The Securities Investor Protection Corporation (SIPC) and the Investor Protection Trust (IPT) tested 635 self-proclaimed investors-a group screened from an initial survey of 2,063 adults-on key investment knowledge and behavior.
The two organizations say that 83% of the test takers failed, and that women were more likely to fail than men by a margin of 91% to 77%.
In an example of how the group performed, only 21% said they practice all four of the desirable behavioral traits focused on in the survey: reading prospectuses, regularly reviewing account statements, checking out the disciplinary backgrounds of brokers/financial planners and having a financial plan in place.
About 80% of the investors mistakenly believe they are insured against investment fraud losses, says SIPC President Stephen Harbeck.
"These findings indicate just how big a job remains in front of organizations such as SIPC that are committed to investor education," Harbeck says. "When four out of five Americans mistakenly think that there is an agency out there somewhere that insures them against investment fraud losses, we obviously have our work cut out for us."
There were some encouraging results, according to the two groups.
Ninety percent of the investors said they regularly review their brokerage account and/or mutual fund statements. Also, 74% demonstrated that they understand the concept of diversification.
Among the other findings:
Only about 36% of investors have checked the disciplinary backgrounds of their stockbroker and/or financial planner; 70% said they did not check their advisors' backgrounds because they either trusted the individuals or were assured by them that there were no problems.
Only 8% of investors understood that no agency or organization "insures you against losing money as the result of fraud in your investment portfolio."
Fewer than two in five investors, 39%, understand how sales fees and commissions work in the no-load mutual fund industry. And only 41% understand the basic rule of bond investing, that as interest rates go up bond prices tend to fall.