Broker-dealer asset growth outpaces rival channels, Cerulli says

B-Ds grew assets at a rate of 9.1% year-over-year, beating industry's overall rate by 1.9%.
DEC 15, 2017

It's been a good year for broker-dealers, compared with rival channels. The latest data from research and consulting firm Cerulli Associates found that national and regional B-Ds grew assets at a rate of 9.1% year-over-year, faster than all other adviser channels. B-Ds beat the industry's overall growth rate by 1.9%. (More: UBS team managing $440 million moves to Raymond James) Kenton Shirk, the director of Cerulli's intermediary practice, said growth was driven partially by European banks exiting private wealth in the U.S., "but recruiting advantages — scale, brand and culture — are driving organic growth." WIREHOUSE RETRENCHMENT Mr. Shirk said that the recruiting scale-back and reduced bonuses at wirehouses have lowered the compensation advantage they've historically held over B-Ds. This has opened the door for national and regional firms to invest aggressively in recruiting. Louis Diamond, vice president of Diamond Consultants, said he wasn't surprised at all by the strong growth at B-Ds. "There's a lot of headwinds facing the wirehouses now," Mr. Diamond said. "There's a general unhappiness with the bureaucracy, changing compensation structures and lack of control that advisers face. The response is to go to a regional brokerage firm." Three-quarters of advisers who recently switched firms and left a branch network cited culture as a moderate or major factor in their decisions, according to Cerulli's research. (More: Morgan Stanley's aggressive move against former employee puts brokers on notice) "Large national and regional firms that maintain an adviser orientation are best positioned to promote large-firm resources with a smaller firm culture, an attractive message for advisers seeking to depart bureaucratic and impersonal organizations," Mr. Shirk said. Mr. Diamond said advisers are choosing the B-D channel because the regional firms still allow them to monetize their business better than going independent. TECHNICAL ISSUES Many advisers may have grown a great book of business, but don't have the entrepreneurial spirit to start their own firm, Mr. Diamond added. They prefer the comfort and support a regional firm provides, especially in providing a turnkey technology platform. Mr. Shirk said technology is rarely the only reason an adviser moves firms, but said it is playing a more prominent role in the decision. Mr. Shirk said large firms should emphasize the developments they are making in technology, as it is "a value proposition that is difficult for smaller competitors to replicate." However, B-Ds are still at a disadvantage technologically. Mr. Diamond said that technology from the wirehouses and in the RIA channel is usually better. "It's definitely an area where the regionals are playing catch-up," Mr. Diamond said. Cerulli reported that the small B-Ds are struggling with already thin profit margins to maintain modern technology, comply with new regulations and keep high-end advisers from going independent. As a result, many are joining larger independent broker-dealers to take advantage of scale and infrastructure while maintaining some degree of autonomy.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.