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August 10, 2018 at 03:04 PM
Historically, financial advisors have admired the wirehouse model, in part because of the reputation and credibility those advisors could leverage with new and existing clients. The major wirehouses — Morgan Stanley, UBS Wealth Management, Merrill Lynch and Wells Fargo — stood tall as household names, and affiliation with those brands could give advisors a competitive leg up.
However, due partly because of an avalanche of bad press, from institutional failures in 2008 through recent cringeworthy headlines, more and more financial advisors are leaving the wirehouse world to become RIAs. Wirehouse brokers used to benefit greatly from a branding standpoint by being affiliated with those firms, but negative public exposure in some cases has made it lose its luster — even become somewhat of a liability.
This makes the RIA channel more attractive than ever — advisors can build their own brands free from the perceived baggage that has come to be associated with some of the wirehouse affiliations.
A Decade of Disastrous Exposure
The onslaught of negative press was first unleashed in September 2008 and has continued tarnishing many wirehouse brands and subsequently their advisors. We all remember the damning headlines of fraud and corruption during the financial crisis of 2008 and the years following. In 2012, Barclays and UBS were mired in a massive Libor manipulation scandal. Most recently, in 2016, Wells Fargo’s reputation tanked with reports the mega-bank created millions of unauthorized bank and credit card accounts without their customers ‘ knowledge. The list goes on.
The CFA Institute’s Crisis of Culture Report found that 53% of 382 senior financial services respondents “think that career progression at their firm would be difficult without being flexible on ethical standards.” Pair that type of culture with unrelenting press scrutiny, and you have a recipe for recurring public relations nightmares. Consequently, a recent Bloomberg National Poll found that 69% of Americans distrust Wall Street executives.
Shad Besikof is president and COO of 