Wirehouses' managed account market share, currently 56% of total fee-based assets, will likely sink to 50% by 2014, a Cerulli report predicts, knocked down by competition from an increased focus on fee business by banks and regionals.
It's not that wirehouses won't continue to capture assets and grow, says Patrick Newcomb, an analyst at Cerulli, but banks such as JPMorgan Chase and regionals such as Edward Jones are starting to gobble up market share as they build out their fee-based platforms. For example, Edward Jones launched a mutual fund advisory program in 2008 that had already built assets of $44 billion as of the third quarter of 2010.
Prior to expanding into the mutual fund advisory space, Edward Jones was a transaction-based firm, says Newcomb. "When they launched this advisory program it really was a huge hit among advisors who transitioned from commission sales to a fee-based environment," he says.
Wirehouses still have the most robust managed account offerings for the different programs, such as mutual fund advisory programs, rep-as-portfolio manager programs, rep-as-advisor programs and unified managed accounts, because wirehouses are where these programs were created, he says. And these programs have been growing very quickly in the past year and a half despite, or because of, the downturn. But other firms, such as RBC Wealth Management, TIAA-CREF and Raymond James have caught on driving wirehouse market share down. In fact, the market share at wirehouses was as high as 70% of assets in 2001.
The solution, says Newcomb, for asset managers looking to gain distribution of their mutual funds is to identify regional firms or banks with fast-growing managed account programs in order to gain distribution within those channels.
"Much of the future of the channel depends on the success of the integration of the pending mergers and joint ventures, and the ability of the firms to retain and recruit advisors," the Cerulli report said.
Nonetheless, the wirehouse channel still has a very large number of advisors across only four firms. In addition, they have more than $1 trillion in managed account assets under management in the strongest managed account programs.
While the wirehouses will remain strong they will have more competition from other channels, which are expected to experience increases in market share. Wirehouses, Cerulli anticipates, will see flat growth due primarily to tight margins and revenue growth pressure, which will impact the survival of some firms.