Everyone, yes everyone, is now trying to offer financial advice to the clients of Wall Street retail brokerage advisors—especially the wealthy ones. The onslaught is coming from above and below and beyond. Partly because of a few little slip-ups the firms made back in 2007 and 2008 (almost collapsing into the void, taking mammoth government bailouts) and partly because it’s just an attractive business to be in these days—with Baby Boomers retiring and more individuals wanting or needing advice in the wake of the meltdown in the securities markets and as investing simply gets more complex.
From Below: A few weeks ago, I wrote about how direct investment sites like E*Trade and directly competing with financial advisors by offering managed account services and other kinds of financial advice.’s discount service—originally aimed at middle-income clients and wealthy investors who wanted to experiment with play money—are
From Above: Then last week, I wrote about a McKinsey report that urged private banks to go after “core” millionaires—those families with between $1 million and $10 million in assets, many of whom are the beans and baloney of Wall Street’s major retail brokerages, also known as wirehouses: Bank of America/ , UBS, Morgan Stanley Smith Barney and Wells Fargo.
Now this week we hear from Cerulli that, apparently, the private banks are already doing a pretty good job of courting very wealthy clients and that this should continue. In fact, they gained the upper hand in this market back in 2010.
Cerulli’s report notes that the share of the high-net-worth market held by the four big wirehouses’ peaked in 2007 at 56 percent of assets, is now at 45 percent and will drop to 42 percent by 2014. Private client groups—Barclays, Bank of New York Mellon, Deutsche Bank—meanwhile had grabbed 47 percent of the market by 2010 and this should jump to 49 percent by 2014, Cerulli predicts.
Barclays is definitely planning to ramp up its wealth management business this year, though it wouldn’t talk to us about it. We noticed many weeks back a short article in Money Marketing about a Bloomberg interview with Barclays CEO Bob Diamond that suggested the firm has aggressive growth plans for its wealth management business. He said wealth management is one of just two areas the firm plans to grow in 2012 after recording double-digit growth in revenues and profits over the past two years. “Tom Kalaris, who runs that business with us, has a very specific five-year plan to move that business into the top tier and it should continue to see double-digit growth,” he reportedly told Bloomberg. When we contacted Barclays to find out more, the firm declined to offer any additional details or make executives available for an interview. What do they have up their well-tailored sleeves, we wonder?
From Next Door: But it’s not just direct investment platforms and private banks. There are of course the booming RIAs, aka registered investment advisories or boutique investment adviser shops, and the multi-family offices. They still have a much smaller share of the high-net-worth market, but are growing the most rapidly. They more than doubled their assets from $178 billion in 2005 to $356 billion in 2010. This flight of assets from the wirehouses to the RIAs is, of course, something we have written about ad nauseum.
Here is how Cerulli describes the problem for the wirehouse firms: “Multiple factors contribute to the loss of share for the wirehouses,” writes Cerulli in its report. “First, wealthy investors diversified the firms where they held their money as well as their sources of advice, choosing to do business with more providers. In this case, some of these assets fled the wirehouses as these firms flirted with insolvency during the bear market. Second, the wirehouses also saw advisors depart for firms in other channels and take their clients with them.”