U.S. Broker/Dealer Marketplace 2018: Escalating Margin Pressure
Independent Broker/Dealer (IBD) Growth Surpasses Regional, National, and Wirehouse Channels
Across all B/D channels, IBDs have experienced the greatest asset and headcount growth over the past five years
FOR IMMEDIATE RELEASE
November 2018, Boston. New data from global research and consulting firm, Cerulli Associates, finds that IBDs have posted a five-year compound annual growth rate (CAGR) of 11%, which beat out the gains of retail bank B/Ds (9%), as well as national and regional B/Ds (9%). The channel’s five-year CAGR nearly doubled the four wirehouses, which posted a mere 6%.
“IBDs have the second-largest advisorforce at more than 59,000, a total that soars to an industry-dominating 86,779 when including hybrid registered investment advisors (RIAs). Likewise, IBD channel assets totaling $2.8 trillion surge more than 20% when including hybrid advisors’ assets held by their respective B/Ds,” states Ed Louis, a senior analyst at Cerulli. “However, the sheer size of the channel is not the explanation of growth.”
“To explain the growth, Cerulli displays four IBD subsegments: True, Institutional, Niche, and Insurance Legacy IBDs,” continues Louis. “It’s the Niche (14%) and Institutional (11%) IBD segments that have buoyed channel growth over the past five years. Institutional IBDs are the largest. Although there are only 24 in total, they control 49% of the channel’s advisorforce and 59% of the assets. The segment continues to benefit from national scale, brand reputation, and increasing advisor counts through recruiting efforts and large acquisitions.”
In comparison, Niche IBDs are dramatically smaller. There are only 14 firms, which control just 11% of the channel’s advisors and 14% of assets. However, these firms continue to benefit from focusing on specific niches or products (e.g., retirement plans) and their advisors are the most productive in the channel.
The accelerated growth of the IBD channel makes it an appealing target for asset managers seeking broader distribution opportunities. According to Louis, “IBDs remain one of asset managers’ most consistent opportunities due to the large number of potential firm partnerships, advisors, and accelerating growth from the hybrid channel.” That said, in order to continue the pace of growth, Louis believes that the channel will need to evaluate succession planning models, improve advisor productivity, and protect against large teams migrating to the independent RIA model.
Cerulli’s latest report, U.S. Broker/Dealer Marketplace 2018: Escalating Margin Pressure, provides in-depth market sizing and competitive analysis of B/D channels, including wirehouses, national and regional B/Ds, IBDs, insurance B/Ds, and retail bank B/Ds. This report extensively covers recruiting and transition trends, including advisor movement sizing, advisor channel preferences, advisor retention, and transition metrics.
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