In 2009, wirehouse firms lost almost 1% of the market share, but picked up about $500 billion in assets, according to a report by the Aite Group. While quarterly net asset flows are improving, they remained negative throughout 2009 for wirehouses, which ended 2009 $900 billion below year-end 2007 levels.
Meanwhile, self-clearing retail brokerage firms outside of wirehouse firms and the registered investment adviser (RIA) space gained market share in 2009 (up 0.5% and 1.5%, respectively) and in some cases surpassed 2007 asset levels. Online brokerage firms also saw an increase in market share of 0.8%.
At the end of 2009, the U.S. wealth management market, including retail brokerage and RIA segments, represented $12. 4 trillion in total client assets and approximately 451,000 financial advisers. Aite estimates that adviser levels are down by almost 2% since 2008.
Within the wirehouse space, Morgan Stanley Smith Barney holds the largest share of assets (33%), followed by Bank of America Merrill Lynch (30%), Wells Fargo Advisors (23%), and UBS (14%). That represents a drop for Morgan Stanley Smith Barney, which held 34% of the market share in 2008 and 36% in 2007. Bank of America, on the other hand, is catching up, with an increase from 28% in 2007.
While UBS has hired financial advisers and had positive net new money flows in Q4 2008 and Q1 2009, Aite noted that Merrill Lynch and Smith Barney were in transitions with their new parent companies, resulting in each experiencing net outflows of client assets to the tune of $40 billion in Q1 2009 alone.
Wirehouse attrition has been a big point of discussion in the wealth management industry, and the possibility of wirehouse advisers leaving wirehouse firms to go independent has been widely debated (see “How Many Brokers Really Went Independent in 2009” and “Wirehouses Plan for Retention and Recruitment in 2010”). Aite’s study and others do show that the big wirehouse firms are losing some advisers. In 2008, there were 64,521 advisers in the wirehouse channel; at the end of 2009 it was 55,185. Aite’s survey of 406 advisers found only 15% of wirehouse advisers said they have no desire to break away, while one-fifth said there is a 50% chance or higher that they will leave in the next two years.
Nonetheless, wirehouses remain powerhouses, with 12%, or 55,186 advisers, in the wealth management space, managing more than twice the assets per adviser than their non-wirehouse peers. Within the wirehouse space, Morgan Stanley Smith Barney holds 33% of the market share of advisers, followed by Bank of America and Wells Fargo (both about 27%), and UBS (12.8%).
Self-clearing retail brokerage firms outside of the wirehouse space retained their adviser headcount in 2009. For instance, Edward Jones added almost 500 advisers, bringing its total to 12,615, according to the report.
RIA custody firms reported success on the breakaway front—most notably Charles Schwab, which reported 172 breakway teams in 2009, up from 123 in 2008. However, Aite said other custodians were less specific about their breakaway numbers, suggesting that the “dust is settling on the dramatic shift of advisers to the RIA segment.”