Filed Under:Life Insurance, Life Planning Strategies

AUM of independent advisors to surpass wirehouses

Independent advisors’ share of assets under management is on track to surpass that of wirehouses’, according to a new survey.

Tiburon Strategic Advisors published this finding in a new survey, “Financial Advisor Channels: An Overview of Full-Service Brokerage Firms,  Independent Advisors, & Other Financial Advisor Channels.”

The report reveals that wirehouses’ share of assets under management will fall to 35 percent from 43 percent while that of independent advisors will grow to 39 percent from 35 percent within the next year.

While observing that independent channel is growing in size (by 3 percent annually) the survey finds the rate of increase is slowing. The number of “break-away brokers” (those who leave brokerage and captive firms) going independent is likely closer to 400 per year, down from 500 in 2009.

Part of the growth is coming from a downsizing of the wirehouse channel: Four wirehouses have shed almost 7,000 financial advisors during the past two years (13 percent of their sales forces). And estimated 12 percent of wirehouse and regional broker/dealer brokers are leaving their firms for other firms or to start their own firms each year.

The report notes that break-away brokers have shorter tenures than the average financial advisor (11 years versus 14 years). Break-away brokers also have higher assets under management than the average financial advisor ($243 million versus $231 million) and higher revenues than the average financial advisor ($1.2 million versus $1.1 million).

The survey finds that 25 break-away broker aggregators have emerged. Geneos Wealth Management, VSR Financial Services and High Tower Advisors are the leading break-away broker aggregators with 71, 30, and 18 acquisitions, respectively. High Tower Advisors is the leading break-away broker aggregator in terms of assets under administration with $19.0 billion.

Among the report’s additional findings:

  • There are 20,500 fee-based financial advisors, including 10,900 registered with the Securities & Exchange Commission;
  • Fee-based financial advisors have gathered $3.0 trillion assets under management, including $2.5 trillion at SEC-registered fee-based financial advisors;
  • The number of fee-based financial advisors will reach 19,009 by 2016, up 20 percent since 201;
  • Fee-based financial advisor custodians’ net profits will increase to $4.2 billion by 2016, up 250 percent from 2011;
  • The average rep firm has grown its client base by 5 percent per year; growth has stagnated for the larger firms;
  • Fee-based financial advisor custodian assets under administration will increase to $14.0 trillion by 2016, up 250 percent from 2011;
  • Fee-based financial advisor custodians’ revenues will increase to $28.0 billion in 2016, up 250 percent from 2011;
  • Fee-based financial advisor custodians’ net profits will increase to $4.2 billion by 2016, up 250 percent from 2011.
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