EDITORIAL and MARKET TRENDS UPDATE: WIREHOUSES AND REGIONAL FIRMS Frances McMorris Editor-in Chief of On Wall Street Editorial Director, Special Projects
On Wall Street THE AUDIENCE As of the end of 2011, there 629,518 registered representatives. On Wall Street covers financial advisors/brokers/wealth managers who are employees of the largest full-service, national and regional brokerage firms. On Wall Street THE AUDIENCE As of the end of 2011, there 629,518 registered representatives. On Wall Street covers financial advisors/brokers/wealth managers who are employees of the largest full-service, national and regional brokerage firms. (Source: FINRA.org)
Wirehouse Head Count
The War for Talent/Compensation Competition Capturing more of a high-net-worth clients assets Retirement Income Distribution Global Investment/Emerging Markets Investment and Tax Strategies & Products: Mutual Funds, Annuities, Separately Managed Accounts, Exchange-Traded Funds Market Trends In Wealth Management
The Dominant Force in Market Share Wirehouses and Regionals Will Continue To Control Market Share of Client Assets Even Though the Number of Advisors in This Channel is Trending Down. Source: Cerulli
Trends and Impacts Advisors are moving from wirehouse to wirehouse; from wirehouse to independent B/D and RIA; from IBD to IBD Wirehouses, banks and IBDs consolidated to shore up solvency. Four large wirehouses remain; regionals are gaining share of advisors IMPACT ON READER Individual advisors are still struggling with how to define their value after 10 years of managing money in a flat to down market. Advisor must re-engage clients with new communications and services Use technology to free them to spend face time with clients Wirehouse advisors need to understand new compensation structures All advisors need news about structural and competitive changes Culture shock an issue as advisors move
The coming fiduciary standard could reshuffle the competitive cards The Securities and Exchange Commission is still devising a uniform fiduciary standard for all financial advisors, regardless of whether they work for broker-dealers or as registered investment advisors. IMPACT ON READER Brokerages will lose 4%-10% of their broker-generated profits each year by some estimates Costs will include new compliance and training as well as new software (SIFMA) Broker-dealer reps want training. (Financial Planning/On Wall Street/Envestnet poll) Firms will have to provide greater supervision over advisors, transparency and disclosure to investors Trends and Impacts
GLOBALIZATION High-Net-Worth individuals continue to move investments beyond their home regions (Capgemini World Wealth Report) Among U.S. investors, the equity mutual funds with the highest inflows in 2010 YTD were overseas funds (Morningstar) Trends and Impacts
DEMOGRAPHIC DYNAMICS The Retirement Wave is coming and were unprepared Baby Boomers have started turning 65 in big numbers. (US Census) As of 2010, 57% of Americans expect their spending in retirement to be lower than it is today, and 70% of retirees intend to work for pay. (EBRI) Today, a man's average life expectancy at 65 is 17.2 years (to age 82), roughly 32% longer than in 1970 (US Census) A 65-year-old woman today can expect to live another 20 years, on average, compared to 17 in 1970.
Trends and Impacts IMPACT ON READER Advisors will need to help clients stretch money to last 30+ years. Market volatility could have greater impact on portfolios in decumulation mode. New products will have to supplement/replace Medicare, Social Security and traditional pensions. Need for retirement planning and cross-sell (long-term care, annuities, etc.). Advisors, especially at banks, struggle with both.
Products Sold by Readers to Their High-Net-Worth Clients IRAs/Keoghs 529 College Savings Plans Fixed Income/Bonds Common Stock Variable Annuities Mutual Funds (LOAD) Exchange-traded funds REITS Alternative investments
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