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Industry Spotlight > Wirehouse Firms

Wirehouses, Banks Control 75% of HNW Assets: Cerulli

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Wirehouses and banks control nearly three-quarters of all high-net-worth assets in the United States, according to a new report from global analytics firm Cerulli Associates.

“As of year-end 2014, wealth managers controlled approximately $8 trillion in HNW and ultra-high-net-worth (UHNW) client assets,” Donnie Ethier, associate director at Cerulli, said in a statement. “The longtime market leaders – the wirehouses, private banks and trust companies – have maintained their reign with a collective market share of 72%.”

According to Cerulli’s report, High-Net-Worth and Ultra-High-Net-Worth Markets 2015: Understanding and Addressing Family Offices, just 0.84% of all households are HNW, but these households control 35% of all investable assets.

While wirehouses, private banks and trust companies remain the three largest HNW channels, other channels are making gains, Cerulli reports.

The growth of the private banks (11%) and trust companies (7%) has not kept pace with the industry’s average growth over the last year, according to Cerulli.

And while the wirehouses have kept pace (14%), so have broker-dealers, multi-family office (MFOs) and registered investment advisors (RIAs).

Ethier notes that this change in annual growth may not necessarily mean a loss of assets.

“Wirehouse assets lessened from past years; however, this is not always due to a loss of assets,” Ethier said in a statement. “Instead, it can be due to a change in Cerulli’s methodology, including redistributing a wirehouse’s assets to an affiliated channel. An example is separating U.S. Trust’s marketshare from Merrill Lynch.”

What’s perhaps “most threatening” to these traditional leaders is that Cerulli expects the growth of multifamily offices and RIAs to outpace the wirehouses and particularly banks over the next five years.

Cerulli anticipates providers’ control of HNW assets to expand by 7.3% by 2019. Meanwhile, multifamily offices and RIAs are expected to be amongst the greatest winners with 10% and 9%, respectively.

According to Cerulli, the direct-to-consumer channel is also expected to outpace banks and trusts.

Cerulli still believes that it will be “a long time, if ever, before the direct, RIA, and MFO channels surpass the wirehouses and private banks,” according to the report.

Trust companies may have more to fear, though, according to Cerulli.

“[RIAs and MFOs] are on the heels of trust companies and closing of this gap is only expected to accelerate,” the report states.

Cerulli attributes this to the fact that there are trends starting to materialize that “some firms have prepared for (and others have ignored).”

“Essentially, advisors and clients are electing transparent, unbiased advisory practices that can aid financial and nonfinancial needs,” the report states. “Most private banks are well equipped to meet these needs but other obstacles, including reputations, headline risks of proprietary funds and a lack of recruiting advisors, will likely cloud efforts.”

According to Cerulli, wirehouses and banks need to stop relying on intra-channel recruiting – for example, wirehouse-to-wirehouse – if they want to experience more than just moderate growth.

“Moreover, heirs of their existing clients may be the biggest wild card as they will likely boost growth within the independent and direct channels,” the report states.

The report points out that current clients’ and their heirs’ comfort with technology may also drive them away from the traditional channels.

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