A billion-dollar AUM team breaks away from a wirehouse to start an RIA.
A $10 billion team leaves UBS for Rockefeller.
A $4 billion team leaves Merrill to join 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 show a pattern of impending demise for the wirehouse channel:
• In a 2023 report, Cerulli Associates said, “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” at Diamond Consultants, wirehouses lost a net 348 advisors last year, while the independent channel gained 563 advisors, and the regional channel gained 41 advisors.*
So it would seem that the wirehouses are headed for extinction. But perhaps the reports of their death have been 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.
But even though 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.
Despite the net losses in 2023, the most popular destination for a wirehouse advisor was another wirehouse. More than 50% of advisors in this space opted to transition to a same-channel competitor rather than going independent or joining a regional or boutique brokerage firm.
Why is a move within the channel still so popular?
• More times than not, advisors stay in the wirehouse ecosystem because of its comfort and familiarity—and we do not see this changing in the future (the story is the same in the independent space, as well). Although there are similarities in firms, there are noticeable cultural and strategic positioning differences among the major players: For example, the bank ownership of Merrill Lynch by Bank of America creates a culture different from 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. Yet these folks still value the turnkey nature of the firms, the vast platforms and resources, the 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 each advisor’s average revenue). Furthermore, teams in the segment tend to grow faster than their industry peers. Advisors tend to focus on growth and like platforms that will help them continue to add assets, and we expect this to 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 will continue to keep many advisors and their teams locked up for a minimum of five to seven years—and keep them off the open market.
That said, the wirehouses face some headwinds.
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. The capabilities of the independent space are only increasing, as are clients’ comfort with it. All else being 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 more often looking to own their own businesses—which means the next crop of team leaders and top advisors at wirehouses will be a greater flight risk than ever before.
There’s been no better time to be an advisor. This competitive recruiting environment, where there are many compelling firms, means advisors are 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, the data and trends suggest that this channel will continue to remain more than relevant in the years ahead. Advisors thinking about their futures can thus think long and hard about where their businesses and clients will be best served, and if it’s not in a wirehouse, that’s fine—because there are more exciting options than ever before.
Louis Diamond is president of Diamond Consultants, a recruiting firm for financial advisors and registered investment advisors.
*The data focused on advisors with a length of service greater than three years.