The wirehouses have been steadily losing client investment asset market share over the past decade and that trend is only expected to continue in 2022 and beyond, according to Aite-Novarica Group.
The research firm expects the market share for non-wirehouse, self-clearing, retail broker-dealer firms to remain about flat between 2021 and 2025 and for discount/online brokerage firms to increase from 23.5% in 2021 to 26.8% in 2025.
The firm is projecting "relatively stable market conditions and no major change in performance differentials among channels" over the next few years, meaning "we do not expect one channel to suddenly become much more efficient than another," it said in the new report, "New Realities In Wealth Management: The Storm Passes, Growth Continues,"
But the wirehouse channel is expected to continue losing more market share than any other financial wealth management segment through 2025 after being the only channel in the industry to see a decline in market share every year since 2016, according to the report.
After shrinking from 33% in 2010 to 25.8% in 2020, Aite-Novarica Group estimates the wirehouse share will continue to fall, declining from 25% in 2021 to 24.2% in 2022 and 21.9% in 2025.
But recent shifts in strategy by Bank of America and Morgan Stanley, which have made "substantial investments in online brokerage to generate in-house referrals to their wirehouse businesses," could "change the market share trajectory for this segment," according to Aite-Novarica.
Another positive: Total client assets in the wirehouse segment increased 16% for the second straight year in 2020, to $9.6 trillion, the research firm said.
Each of the four wirehouses increased their client assets from 2019 to 2020, with Morgan Stanley's growing 17% to $3.2 trillion, Merrill Lynch's growing 13% to $2.9 trillion, Wells Fargo's jumping 22% to $2 trillion, and UBS's increasing 12% to $1.6 trillion, Aite-Novarica said.
UBS "leads the segment regarding client assets per advisor," with an average of $249 million, compared with $198 million for Morgan Stanley's average advisor, $167 million for Merrill's average advisor, and $148 million for Wells Fargo's average advisor, according to the research firm.
"The wirehouses are actively right-sizing their client bases, targeting larger clients, and shifting the less affluent to hybrid and robo-advice," the report said.
In the meantime, however, the wirehouses also "continue to steadily lose advisors to other channels," according to Aite-Novarica.
Although the number of Morgan Stanley advisors inched up 3% (532 advisors) to about 16,000 advisors in 2020 from 2019, Merrill's advisor count dipped 1% to 17,331, while Wells Fargo's fell 6% to 13,513 and UBS's dropped 4% to 6,305, the report said.
"While advisors' departure from the wirehouses is primarily driven by the increased accessibility of independence, significant numbers of advisor departures have been due to the wirehouses pruning their least productive advisors," the report said.
