Independent wealth management shops continue to lure clients away from the big U.S. brokerages, according to a survey by online brokerage giant Charles Schwab Corp
Nearly all of the 1,144 independent financial advisers surveyed in January gained clients in the prior six months, and nearly half of the new business came from wirehouses like Merrill Lynch and Morgan Stanley Smith Barney, the poll found.
Schwab, which surveyed advisers overseeing more than $252 billion of client assets, said 92 percent of those polled added customers in the last six months, and 46 percent of the new business came from wirehouses.
Executives at the big brokerages, traditionally known as wirehouses for their use of communication systems to quickly transmit prices and news, argue that the breakaway movement has been overblown and that the movement of brokers will slow from last year's record levels.
Most departures, they say, involve lower-producing advisers who take few clients with them.
Charles Schwab Advisor Services head Bernie Clark, whose unit encourages wirehouse brokers to break away, and sells trading, custody and other services to small advisory firms, sees a lot more movement in the year ahead.
The trend itself is in the early stages and will continue, Clark said on the sidelines of an industry conference in New York. We should not be thinking about this as a tsunami of growth.
While there may be fewer brokers moving between wirehouses -- vast numbers of brokers have signed retention plans or long-term deals in the past year -- Clark expects the movement of advisers to keep rising.
We helped convert 123 advisers in 2008 and 172 advisers last year. Our expectation is we will outperform that total this year, he said.
Since the 2008 financial crisis, independent shops have gained customers and advisers dissatisfied with traditional firms. Schwab said its survey found that customers and advisers have lost confidence in the big firms.
Citing industry research, Clark said $50 billion to $60 billion of assets will shift from big brokerages to investment advisory firms this year. A total of $188 billion in assets is expected to flow out of the largest brokerages.
Schwab leads the breakaway brokerage business with a network of some 6,000 independent advisers managing about $600 billion in assets.
It competes with TD Ameritrade Holding Corp
In the Schwab survey, 86 percent of the advisers surveyed said they won business because they were independent, and 83 percent said their fiduciary status -- a legal duty to invest in a client's best interest -- was a key attraction.
Clark said he did not think wirehouse brokers could be true fiduciaries because they are encouraged to sell investments and funds produced in-house by their firms.
There's still a lot of proprietary product in wirehouses, and I think the expectation is that the proprietary product is distributed by their sales force and their financial advisers. That's the conflict, he said.
(Reporting by Clare Baldwin, Helen Kearney and Joseph Giannone; editing by John Wallace and Robert MacMillan)