The $16T pool: Most retail AUM is at 10 corporations, report finds

Following heavy consolidation in recent years, the lion’s share of retail wealth has ended up on the largest business retailers. 

A brand new report by business analysis agency Cerulli Associates discovered that 58% of all retail shopper property in wealth administration have been housed on the prime 10 largest broker-dealer corporations by property below administration, as of the tip of 2022. Key findings, revealed within the full report “U.S. Dealer/Supplier Market 2023: The Difficult Pursuit of Natural Progress,” were shared in a press release Friday. These 10 corporations additionally reported amongst themselves 123,000 monetary advisors — accounting for 42.2% of the business, which has a complete pool of about 291,000 advisors, a Cerulli spokesperson stated in an e-mail. 

Meaning out of a complete of $26.9 trillion of AUM within the retail wealth administration universe, 10 huge corporations oversee almost $16 trillion. The wirehouses, specifically, dominate that listing — regardless of fixed headlines about advisors breaking away for independence lately. 

“Over the past decade, one-fifth of the top-25 B/D corporations by AUM as of 2012 have both been acquired or merged, reflecting the consolidation that has been attribute of the B/D market as corporations are pressured to extend scale to stay aggressive,” Cerulli stated in a press launch on the information. It added that scale offers higher negotiating energy for broker-dealers with asset managers, however generally is a double-edged sword, additionally elevating the chance of making dissatisfaction if advisors feel culturally lost in a firm that grows too quick. 

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“Once we current this knowledge to our shoppers, they’re at all times taken without warning,” stated Mike Rose, director of wealth administration at Cerulli Associates and the lead creator on the report, in an interview. Many within the business, regardless of following the information of mergers and acquisitions, are nonetheless shocked to be taught of the sheer magnitude of property managed by the biggest corporations. 

“I at all times inform those who the 4 wirehouse corporations — Morgan, Merrill, UBS and Wells Fargo Advisors — these 4 corporations management extra property than the 16,000 RIAs mixed,” Rose stated. 

He added that the highest 5 spots among the many largest broker-dealers have been dominated by the wirehouses and regional-national agency Edward Jones. LPL, Osaic (formerly Advisor Group) and Ameriprise have been amongst these in the remainder of the highest 10, he stated. Cerulli declined to disclose the remaining corporations or affirm their rankings within the listing. 

The report’s knowledge was based on analysis carried out by Cerulli in 2022, a spokesperson for Cerulli confirmed in an e-mail. 

Wirehouses specifically shined when it got here to relationships with excessive web value and ultrahigh web value shoppers — far and away, they’d the best share of shoppers with wealth above $5 million, since such shoppers have been prone to choose the advantages of further funding banking and lending providers these wirehouses provide, Rose stated. 

Diamond Consultants

Nonetheless, the report discovered a slight decline throughout the wirehouses when it comes to advisor headcount and market share previously 5 and 10 years, respectively, whereas the nationwide and regional broker-dealers grew across the similar quantity. Unbiased and hybrid registered funding advisors, however, grew probably the most quickly throughout that point. 

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“The wirehouses, no matter what we hear anecdotally, are nonetheless a really viable residence for advisors, particularly these which are working with the excessive web value and ultrahigh web value” shoppers, business recruiter Louis Diamond, president of Diamond Consultants, stated in an interview. 

Diamond stated round half the advisors he sees leaving wirehouses in a given yr select to affix one other wirehouse, relatively than depart the channel. “The reason being consolation, familiarity, the truth that they’re profitable with all the things below one roof the place they do not need to go and construct their very own know-how stacks or supply merchandise,” he stated. “They usually additionally profit from the model … [but] not all wirehouses are created equal.” 

For smaller corporations that will discover it more durable to purchase and bulk up in the next rate of interest setting, Rose stated there are nonetheless methods to outlive. “You do not have to be the perfect at each single [offering]” to advisors, he stated. 

“However it’s good to perceive what your differentiation is and what your worth proposition is, and be sure to’re concentrating on your messages to the varieties of advisors with whom that is going to resonate.”