How will the wirehouses continue to make money?

Then: Brokerage commissions for trades were high with a client routinely paying more than $1,000 for a large equity transaction.
Now: Wirehouses still charge more than discounters, because the Advisor’s expertise and the firm’s research are built into the transaction, to watch the stock, to recommend the stock. Clients who still like paying commissions are okay with this and this model still works. However, nobody is paying as much as they used to. In addition, firms continue to discourage transactional business.
Then: Separately managed accounts (SMAs) were a new concept. Wirehouses charged as much as 3% for the research on the best managers and access to the best money managers in the world.
Now: The SMA business has been largely commoditized. The typical fee for a household in a SMA account is now more like 1.5%. And dropping.
Then: Branch profitability and firm profitability were helped enormously by profits made on Margin trading, where clients paid interest on money borrowed to buy additional securities, creating leverage that in good times enhanced their investment performance.
Now: One of the reasons that this was so profitable for firms is that Advisors were not paid on the interest on margin loans, though they were paid on the transactions generated with the borrowed money. Much of the margin loan business that is done today is done as a “non-purpose loan” whereby the client who has, for example, $5 million with a brokerage firm in securities, will borrow $500,000 to buy a boat. Advisors ARE paid a commission on this transaction, reducing the profitability of this type of lending (that’s right, in a deleveraging society, Advisors are being incented to do transactions that increase their client’s debt. You think that the regulators will look at this as the Fiduciary standard takes hold? I do.).
Then: Clients trusted “Wall Street” and accepted high fees while they were making money in a bull market.
Now: The Big Firms almost all went out of business. Clients no longer see any magic built into the higher fees. And the Biggest Firms have saturated certain markets to the extent that Advisors from the same firm are tripping over the same prospects and each other’s clients. Very few Advisors are able to justify a higher fee, with service or performance, so that lowering fees becomes the only way to compete. The only Advisors who can afford to consistently charge 1% or less are the larger practices. So those large practices are the only ones who are growing at all. How does 15,000 to 20,000 Advisors give you any scale in a business where they only cannibalize each other in a given market?
Then: Recruiting bonuses were 100%.
Now: Recruiting bonuses are over 300%. The latest sign of Big Firms desperation is the Dow Jones report that Morgan Stanley Smith Barney is offering an additional 20% bonus if 50% of the recruited Advisor’s assets are delivered before the end of the current quarter. I’m sure that they can get some Ginsu knives thrown in if they insist. Does that strike anyone else as quarterly earnings report window dressing?
Regulatory costs are going to go up, as well as cost of employee benefits. With all this going on, can the Big Firms afford to still pay their Advisors 45%? Are significant payout cuts coming at the Big Firms?
Then we would REALLY see a flight to independence.