Increased RIA Marketshare Comes at the Expense of the Wirehouses

Increased RIA Marketshare Comes at the Expense of the Wirehouses

Wirehouses still dominate the advisory market, but registered investment advisors and dually registered channels are gaining ground. According to estimates from Cerulli Associates, RIAs will increase marketshare to 28 percent by 2018 after having just 20 percent in 2013.

The “Advisor Metrics 2014: Optimizing Distribution Channel Resources” study reported that this shift has come at the expense of wirehouses. Of practices with at least $500 million in assets under management, 36 percent are RIAs compared to 32 percent of wirehouse firms.

In response, wirehouses have tried to leverage their importance to asset managers by renegotiating their revenue-sharing agreements, but they might have gone too far, “leading asset managers to undergo more intensive analysis of these partnerships and explore alternative distribution opportunities across channels,” according to Kenton Shirk, an associate director at Cerulli.

The report said that asset managers find RIAs to be a compelling opportunity to sell to a highly productive, concentrated team of advisors without the centralized portfolio construction or management of wirehouse firms.  

The shift towards independence has also led a growing number of broker/dealers to introduce new platforms to serve RIAs. These multi-channel models allow b/ds to maximize return by spreading expenses across a wider number of advisors. For advisors needing a lot of support and resources, these b/d channels also allow them to focus on core responsibilities of nurturing client relationships, managing investments and financial planning.  

Speaking of financial planning, Cerulli also reported that more advisors are finding comprehensive advice to strengthen client relationships and plan to offer it to nearly half of their clients by 2017. 

TAGS: Industry
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