RIAs vs. wirehouses: who will gather more share?

RIAs continue to surge while full-service brokerage firms sputter

Aug 13, 2013 @ 3:47 pm

By Dan Jamieson

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Independent registered investment advisors and discount brokers are expected to continue picking up market share from traditional brokerage firms this year, according to Aite Group LLC.

RIA firms expect to grow their client numbers 12% this year, while wirehouse advisers expect 7% growth, according to an Aite survey of advisers completed in the first quarter.

“We see that RIAs are still running ahead almost 2 to 1 in terms of growth, compared to the full-service brokerage models,” said Alois Pirker, research director in wealth management at Aite Group.

RIA have the advantage because they are more nimble and able to customize services, Mr. Pirker said. “The focus that RIAs have is really something that's hard to replicate,” he said.

Discount brokers are also doing well with their focus on technology and self-service, Mr. Pirker said. “Consumers can choose which way the want to work with them,” he said, including accessing various advice options.

Discounters gained three-tenths of a point of asset market share last year, reaching 19%, according to a separate Aite study completed this month. RIAs gained nine-tenths, to a 13% share. Wirehouses still had a hefty 37%, but lost seven-tenths of a point.

In 2012, RIA firms' assets grew by 18%, discount brokers 12% and wirehouses 8.2%.

In the first quarter of 2013, though, wirehouse firms finally reached their pre-crisis asset levels, catching up with their RIA and discount-broker competitors, the study found.

The top four wirehouses had combined net new money flows for the first quarter of $47 billion, close to half of aggregate net new money flows for 2012, Aite said.

Mr. Pirker said financial firms will need to tailor services to particular clients in order to attract a larger share of the pie.

For example, younger clients want some self-service options, he said.

Being given an adviser to work with and “only going through that adviser, for younger clients, is not going to be very satisfying,” he said.

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