2020 was the year that made clear the independent registered investment advisers, and broker-dealers who also work with RIAs, will eclipse the four remaining Wall Street wirehouses in the wealth management and investment advice race.
COVID-19 slowed down but did not halt the flow of advisers fleeing Merrill Lynch, Morgan Stanley, Wells Fargo Advisors and UBS. With many wirehouse advisers not working in the office due to the pandemic, those advisers in some instances had an easier time of leaving because fewer advisers were around to chase after their clients.
First, some numbers. According to a filing in October by Kingswood Acquisition Corp., a new special acquisition company focused on wealth management mergers and acquisitions, wirehouses have been losing wealth management market share to RIAs since the credit crisis over a decade ago.
"Wirehouse asset market share fell from 42.6% to 34.0% between 2007 and 2018 and is expected to fall further to 29.2% by 2023," according to the filing, which cited industry consultants as the source of the material. "Conversely, RIAs and hybrid RIA firms saw an increase in their collective asset market share from 16.8% to 24.2% between 2007 and 2018 and are expected to have an asset market share of 29.6% by 2023."
"One of the key factors driving the shift of financial advisors to the RIA channel is the ability to retain a greater share of the economics associated with the wealth management services they provide," according to the research. Simply put, advisers have the potential to make more money if they leave a wirehouse and move to or launch an RIA.
And 2020 showed the wirehouses are working flatfooted in the RIA market, ceding the fastest growing part of the investment advice industry to the competition.
Meanwhile, independent broker-dealers and RIAs are targeting wirehouse advisers like never before, catering to their needs and business whims. Commonwealth Financial Network, one of the most successful independent broker-dealers, has recently lowered its pricing on separately managed accounts, bringing them in line with the competition to lure advisers. It has boosted its transition bonus for recruits with an eye on wirehouse advisers.
The indies are using the wirehouse playbook against them. For example, LPL Financial in 2018 tapped a wirehouse veteran, Rich Steinmeier, who helped launch the wildly successful Merrill Edge, to take over as head of recruiting. And LPL this year launched a platform for wirehouse advisers and promised to increase those advisers' payouts.
They both seem to be taking a page from Dynasty Financial Partners, one of the most notable third-party service companies that provide technology and infrastructure so wirehouse advisers can seamlessly resign from a bank on and open a new office in days.
Sure, wirehouses are trying to hang onto those advisers’ assets, but the lower pay and the fight to control the client by pushing banking products on customers, is a true drag for advisers.
What are the wirehouses doing to compete? Only one, Wells Fargo Advisors, has actually opened an RIA custody arm to do so. Others, including Morgan Stanley, have reportedly studied the idea, and Morgan Stanley actually acquired a small RIA custody business when it bought online and discount broker ETrade Financial Corp. So, while it’s in a strong position to enter the RIA custody business, it publicly hasn’t said what it’s going to do.
The problem for Morgan Stanley, as well as the other wirehouses, is that RIA platforms like ETrade Advisor Services are in direct competition for tens of thousands of financial advisers who are employees. Broker-dealers like Morgan Stanley also make huge profits from trading and sales commissions, types of businesses that RIA custodians do not play in.
So, there you have it — the independent broker-dealer and RIA sides of the business know exactly what they will do to lure wirehouse brokers to their side of the street, which pays better and gives advisers the incentive of owning their own business and turning bigger profits.
On the wirehouse side, the big four still have the wealthiest clients and their advisers average $1 million or more in annual revenue, two to three times the average investment adviser rep at many firms. Unlucky for them, their top advisers have fully realized how to transition to another business model, and make more money.
[Topic: Wirehouse firms]
The leadership changes coming in June, which also include wealth management and digital unit heads, come as the firm pushes to offer more comprehensive services.
Strategist sees relatively little risk of the university losing its tax-exempt status, which could pose opportunity for investors with a "longer time horizon."
As the next generation of investors take their turn, advisors have to strike a fine balance between embracing new technology and building human connections.
IFG works with 550 producing advisors and generates about $325 million in annual revenue, said Dave Fischer, the company's co-founder and chief marketing officer.
Five new RIAs are joining the industry coalition promoting firm-level impact across workforce, client, community and environmental goals.
RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.
As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.
