Wirehouse advisors continue to manage the bulk of U.S. client assets, says a report published Wednesday by the Boston-based Aite Group report. But online brokerages, like Schwab, are gaining ground and pushing the wirehouse firms to ramp up their online offerings.
The online Merrill Edge platform should help Bank of America-Merrill Lynch stem the loss of clients to the online brokerage channel, analysts say. And it also promises to shake up the brokerage field for advisors and clients alike.
“It’s really key to the bank’s organic growth and the only way to grow after the acquisition [of Merrill by BofA],” said Sophie Schmitt, a co-author of the study, in a phone interview.
“Merrill Edge is very powerful as it provides the mass affluent with a diversity of programs for growing assets …. It also seems integrated with the banking side to help clients set up an emergency and debt accounts. It’s a holistic approach for the mass affluent.”
According to Aite research, the wirehouse broker-dealers — Merrill, Morgan Stanley, Wells Fargo and UBS — held about 38 percent of the $12.4 trillion in assets across the wealth-management industry as of 2009. That figure, though, was 1 percent lower than in 2008.
Meanwhile, online brokerages increased their market share by nearly 1 percent to 17 percent last year. Plus, each of the major online brokerage firms — Charles Schwab, TD Ameritrade, Fidelity Investments and E*Trade — have boosted their account portfolios by 3 to 9 percent in the past two years, Aite says, as more investors look for self-directed options during and after the financial crisis.
A 2009 Aite survey of more than 400 financial advisors at the wirehouses found that nearly one-fourth said they lose most of their clients to online brokerage firms. And close to 30 percent of the wirehouse FAs said they wished their firms offered online trading.
With many clients working more financially and socially online, Bank of America decided to make a move in June. “Banks without such a strategy need to ramp up, and that’s what Bank of America-Merrill Lynch did with this tool,” said Schmitt.