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Nevertheless, wirehouse firms must address advisor pain points to fend off competition from RIA channel
October 2020, BOSTON—Despite ceding marketshare in both advisor affiliations and assets under management (AUM) over the last 10 years, wirehouse firms have successfully maintained the highest rates of advisor productivity in the industry and have led all broker/dealer (B/D) channels in advisor productivity growth during the past one-, two-, and three-year periods, according to The Cerulli Report—U.S. Broker/Dealer Marketplace 2020.
Wirehouse advisors are 124% more productive than the average advisor, finds Cerulli. The channel experienced an 18.8% year-over-year increase in the productivity rate of its advisors, which grew from $147 million per advisor at year-end 2018 to $175 million per advisor at year-end 2019. This growth suggests that the change in tack being made to focus on more affluent investors and to drive organic growth among their advisorforces is beginning to pay off. “Wirehouses have been making large investments in technology that can improve the efficiency with which advisors can operate their business and to improve interactions with clients,” says Michael Rose, associate director at Cerulli. “Technology platforms is one area where wirehouses are leveraging the advantage of their scale with positive effect,” he adds.
Yet, as the registered investment advisor (RIA) channel continues to mature and more third-party providers emerge to support RIAs in these areas, Cerulli expects the advantages for wirehouses will diminish over time. Therefore, to remain competitive, wirehouse firms should identify the motivating factors for advisor defections and shore up areas of limited advisor satisfaction. One area that could be improved is compensation, where wirehouse advisors, in particular, frequently voice their frustrations with complicated and sporadically changing compensation grids.
Additionally, wirehouse advisors cite insufficient staffing support as being a challenge of operating at their firm at a far higher rate than national and regional B/D advisors. “As wirehouses look to grow both the productivity and retention of their advisors, this is one potential area of investment that could pay significant dividends, by addressing a top pain point among their advisors while enabling them to focus less on the operational aspects of their practice and more on business development and relationship management,” concludes Rose.
NOTES TO EDITORS:
These findings and more are from The Cerulli Report—U.S. Broker/Dealer Marketplace 2020: The Increasing Impact of Culture.
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