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Wealth management: US wirehouses feel the pressure

The big US brokerages are losing market share to independent wealth managers. To stop the rot, the wirehouses must rethink almost every aspect of how they do business.

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The traditional wirehouse model of US brokerage and advisory is facing a time of profound change. Its adviser workforce is increasingly expensive and approaching retirement. The advisers themselves are dissatisfied with cumbersome legacy technology platforms, complicated pay structures and the lack of open architecture. 

As a result, many are leaving and taking clients with them. According to research firm Cerulli Associates, the number of wirehouse advisers is projected to shrink from approximately 48,000 last year to 41,000 by 2017. 

Many of the international firms that had a presence in the US brokerage industry have given up the fight. In October it was reported that Deutsche Bank was looking to sell its US private client brokerage business to Raymond James. In the same month Credit Suisse threw in the towel in the US offloading its brokers to Wells Fargo and in June, Barclays sold its US private client business (most of which was inherited from Lehman Brothers) to Stifel. 

That pressure is not only being felt by mid-tier players. The market share of the largest broker/dealers – Bank of America Merrill Lynch, Morgan Stanley, Wells Fargo and UBS – has dropped from 41% to 38% since 2008 according to Cerulli Associates.