“Wirehouse advisers make up just 16% of overall headcount, but control more than 42% of all traditionally advised assets,” states Kenton Shirk, associate director at Cerulli. “The wirehouse channel offers both the greatest opportunity and the greatest challenges for product providers. As they constitute the lion’s share of adviser-directed assets, these firms are a strategic priority for nearly every asset management firm.”
Having recognized their position, wirehouses have sought to maximize the revenue they receive from the product providers through revenue-sharing, preferred partnership programs and other sponsorship opportunities.
“While this has reduced the profitability of wirehouse relationships for asset managers, the pure scale of the opportunity at the wirehouse firms has kept providers from abandoning their distribution efforts,” Shirk explains. “Product providers have become even more focused on maximizing their returns of investment at each wirehouse by implementing portfolio specialist roles in attempts to increase their placement on home-office-generated recommended investment lists, which heavily influence adviser investment decisions.”
Though Cerulli expects modest reductions in wirehouse market share in the near term, the channel will remain the premier distribution opportunity for product providers and, therefore, a central element of their strategic distribution plans.
Cerulli Associates is a global analytics firm in Boston. “Intermediary Distribution 2014: Optimizing Distribution Channel Resources,” which focuses on financial products and distribution, including market sizing, adviser product use, and asset manager salesforces, is available through Cerulli’s website.