IBD Managed Account Assets Catching Up to Wirehouses

Three independent broker/dealers (IBDs) control an overwhelming share of managed account assets in the independent channel, according to data from Cerulli Associates.

Those three firms are: Ameriprise Financial (about 27% of independent assets), LPL Financial (26%), and Raymond James (about 18%). Other firms that hold smaller slivers of managed account assets include: Commonwealth Financial Network, ING Advisors Network, Northwestern Mutual, Securities America Advisors, 1st Global, Signator Financial Services, and Cadaret Grant.

The Cerulli Edge—Managed Account Edition notes that the independent broker/dealer (IBD) channel has been experiencing considerable growth in managed account assets in the last 10 years. Collectively, IBD and insurance brokerage firms account for approximately 15% of the total fee-based managed account industry (an increase of 93% since 1998). The IBD channel is second only to the wirehouse channel, which has actually lost 12% marketshare in the last 10 years. The third-party vendor (TPV) channel, which attributes the bulk of its assets to IBDs, accounts for another 10% of managed account assets, bringing the total IBD-controlled managed account marketshare to approximately 25%, according to Cerulli.

And, as many industry experts have predicted, the current financial crisis could serve as an impetus for more advisers to move from wirehouses to independent channel (see “Advisers Like Independence—Just Not Too Much“). The speculation of a move of advisers from the wirehouse channel to the IBD channel was “compounded by the recent turmoil in the financial system and the sale of two of the top three largest sponsors of managed account programs, Merrill Lynch and Wachovia,” Cerulli says.

Cerulli data show that more than half of IBD managed account assets are held through mutual fund advisory programs. Rep-as-portfolio-manager programs comprise about 12% of managed account assets. Separate accounts are continuing to lose ground—particularly open separate account consulting, which held 12% in 2000 and now has less than 1%. Unified managed accounts might be on the rise since they started a few years ago, but they still hold less than 1% of managed account assets in the IBD channel (see “UMA Success Relies on Advisers“).