A billion-dollar AUM team breaks away from a wirehouse to start an RIA.
A $10 billion team leaves UBS to join Rockefeller.
A $4 billion team leaves Merrill for Raymond James.
The story seems to be the same every day: A top team leaves the wirehouses for another model or to launch their own independent firm.
Even leading industry reports reflect a pattern of impending demise for the wirehouse channel:
• In a 2023 report, Cerulli stated, “By 2027, independent and hybrid RIAs will control about one-third of the intermediary market, continuing the trend of advisors and assets moving to these channels.” And the wirehouse channel is projected to lose the largest market share over the same period.
• Based on data from our 2023 Advisor Transition Report, wirehouses lost a net 348 advisors, while the independent channel gained 563 advisors, and the regional channel gained 41 advisors. (Data focused on advisors with a length of service greater than three years.)
So, it would seem that the wirehouses are headed for extinction. But is that really the case?
The Death Of The Wirehouses May Be Greatly Exaggerated
Backed by data, news headlines and anecdotal evidence, it seems fair to assume that the “Big 4” wirehouses’ best days are behind them—that is, their dominance is a thing of the past.
Although they face fiercer competition from other industry channels than ever before, and plenty of the industry’s elite will continue to choose alternative models, they are still an incredibly popular landing spot.
Even though the segment lost advisors on a net basis in 2023, the most popular destination for a wirehouse advisor was another wirehouse. More than 50% of wirehouse advisors opted to transition to a competing wirehouse rather than going independent or joining a regional or boutique brokerage firm.
Why Is The Wirehouse-To-Wirehouse Move Still So Popular?
• More times than not, advisors change firms within their channel because of comfort and familiarity—and we do not see this changing in the future (this is the same in the independent space, too). Although there are similarities across firms, there are noticeable cultural and strategic positioning differences amongst the major players: For example, Bank of America’s ownership of Merrill relative to the wealth management focus of Morgan Stanley and UBS. Of course, advisors knowingly trade business ownership and autonomy for varying levels of bureaucracy and a W-2 paycheck. Still, these folks value the turnkey nature of the firms, the vast platforms and resources, global brands their clients are comfortable with, and a like-minded group of peers.
• Morgan Stanley, UBS, Merrill and Wells Fargo Advisors are and will continue to be home to the industry’s most productive advisors (as measured by average revenue per advisor). Furthermore, teams in the segment tend to grow faster than industry peers. As advisors tend to focus on growth and the platform that will help them continue to add assets, we expect this fact will keep the wirehouses relevant for decades to come.
• The deep pockets of the firms enable them to pay recruiting bonuses at the top of the market. While firms like Rockefeller and RBC Wealth Management can compete, if the wirehouses remain in the recruitment game and keep the checkbooks open, advisors looking to monetize in a transition will continue to look to this segment.
• While the “true open architecture” or family office model of RIAs and the regionals (which have made a massive leap in capabilities and sophistication in recent years) can easily stand up against the wirehouse model, many advisors (and their clients) like the comfort of being backed by the largest firms on the Street—with all of their lending, trust, investments, planning and capital markets needs fulfilled under one roof. That’s not to say that advisors exiting the wirehouses are unable to service clients in the same fashion, but that the paradigm still resonates for most wirehouse teams considering a change.
• With close to 40% of the industry retiring over the next decade, succession remains top-of-mind for most advisors and their teams. Over the last decade, the wirehouses have crafted fairly compelling “retire-in-place” deals to allow retiring advisors to monetize their practices by transferring them to the next generation. These deals have and will continue to keep many advisors and their teams locked up for a minimum of 5 to 7 years, which will keep many advisors off the open market.
That said, since wirehouse teams no longer transition exclusively to another wirehouse and the growth of other industry segments is still in the early innings, the wirehouses face some headwinds.
What Are The Challenges?
1. There are more legitimate choices than ever before, and new models pop up yearly. More options mean advisors can proactively pick the best business model and firm rather than remaining in the wirehouse world by default.
2. Capabilities and client comfort with the independent space are only increasing. All else equal, most advisors would opt for a higher payout, business ownership and more autonomy. So, the wirehouse firms must continue to improve their offerings and can’t afford to become complacent.
3. Private equity-backed RIAs are in the early days of crafting lucrative financial packages to attract wirehouse teams and can offer something the big firms can’t: equity, long-term capital gains and less bureaucracy.
4. Millennial and Gen Z advisors are opting for business ownership with far greater frequency than older generations—which means the next crop of team leaders and top advisors will be a greater flight risk to independence than ever before.
We continue to believe that there has been no better time to be an advisor. The most competitive recruiting environment full of compelling firms means advisors remain in the driver’s seat and have maximum leverage over both their employers and prospective employers.
Although the wirehouse-to-wirehouse transition is no longer the “default” path for advisors, following the data and trends indicates that the wirehouses will continue to remain more than relevant in the years ahead. For advisors thinking about their futures, this means they can really think long and hard about where their businesses and clients will be best served, and if that does not translate to a wirehouse, that’s fine—because there are more exciting options than ever before.
Louis Diamond is president of Diamond Consultants.