September 22, 2009

Advisors, Assets in Motion

After the financial turmoil of 2008, the consultancy Cerulli predicts more than $800 billion will be transferred between distributors in 2009 as a result of advisors changing firms.

Cerulli Associates' latest research report, entitled "Advisor Migration: The Changing Landscape

of Retail Distribution," estimates that $800 billion could be transferred in 2009 as a result of advisors changing firms.


Wirehouses should lose the most, while RIAs and hybrid advisors are likely to be the greatest recipients of this money in motion.


"With high attrition rates and assets per advisor, we expect wirehouse firms to suffer the most: a net loss of $188 billion going to other channels. Insurance and regional channels are expected to lose $13 billion and $6 billion respectively. RIAs and dually registered advisors will receive the largest share of these assets", explains Scott Smith, lead analyst on this report.


The report also forecasts the size of advisor channels to year-end 2012. Its proprietary model quantifies the shift towards indepdendence, and estimates the size of these channels relative to the wirehouses that have long dominated the top spot in terms of advisor headcount and assets under management.


"We project that wirehouses will account for only 13.7% of the advisor headcount by year-end 2012. This is down from 20% at year-end 2008. While this represents a significant loss, we expect that the wirehouse advisor of the future will be relatively more productive, resulting in a highly effective and profitable salesforce," says Smith.


Cerulli estimates that wirehouses' share of AUM will fall from 47.7% at year-end 2008 to 40.7% at yearend 2012.


At the same time, the independent channels (independent broker/dealers, RIAs, and dually registered) are projected to account for 39.3% of assets under management by 2012, nearly equalling the assets at wirehouses.


"While wirehouses are--and will continue to be--the distribution powerhouses for asset managers, the independent channels should garner more attention as they continue to gain ground with more advisors migrating towards independence," adds Smith.


Across channels, about 89% of assets with move advisors switching firms, according to Cerulli interviews with FAs. For independent advisors, this is the case with 92% of clients. For wirehouse FAs, it is 86% and for bank advisors it is 81%.


In confirming these figures with broker-dealers, Cerulli finds that 85% of assets move over with wirehouse advisors, 86% for large independent b-d reps and 75% for bank advisors.

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