By Hal M. Bundrick
NEW YORK (
)--Independent registered investment advisors (RIAs) are lapping their wealth management competition, growing at a rate more than double traditional wirehouse firms, according to a new report from Aite Group.
But the full-service brokerages are far from feeble, experiencing strong asset growth themselves and back to even at last - seeing the recovery of assets under management back to the pre-crisis levels of 2007, thanks to the market mending efforts of the U.S. Federal Reserve.
More than five years after the beginning of the financial crisis, the four largest wealth management firms by assets were finally able to pass their peak of pre-crisis money under management as first-quarter 2013 saw a solid performance for the wirehouse segment. Combined net new money flows for the period totaled $47 billion, close to half of aggregate net new money flows for all of 2012.
But in comparison, RIAs grew more than twice as fast. And registered investment advisors believe they have the momentum on their side, expecting growth in client numbers for the year to reach 12%. Wirehouse firms are expecting a much more modest growth rate, predicting only a 7% increase for their business through 2013. Of course, all of the wealth management firms surveyed said their optimistic outlooks could be fulfilled only on the shoulders of continued boosts to the economy from the Federal Reserve.
"RIAs and online/discount brokerage firms are growing at a substantially faster rate than are full-service brokerages," says Alois Pirker, research director in wealth management at Aite Group. "They have mastered the art of fine-tuning their business models around their client bases, resulting in a superior client experience. Clearly therefore, a continual shift of assets to fee-based platforms and technology leveraged to improve the client experience will be instrumental for full-service brokerage firms to compete effectively against RIAs."
Of the nearly $15 billion in client investment assets held by the wealth management industry in 2012, 37% were held by wirehouse firms, 19% by discount and online brokerages, 16% by fully disclosed retail brokerages, 15% by self-clearing retail brokerages and 13% by independent registered investment advisors.