Are You Paying More For A “Big-Time” Advisory Name? If So, Why?

The Wall Street Journal  points out that the pendulum is swinging back in the direction of big brokerage houses when it comes to money management these days.


Client assets are once again “swelling” at big investment houses like Morgan Stanley and Bank of America’s Merrill Lynch, primarily at the expense of smaller, independent advisory firms.

“The independent channels are still taking away market share, but that takeaway has slowed down,” Bing Waldert, a director at industry researcher Cerulli Associates, tells The Journal.

How “slow”? This from the article:

Before the financial crisis, the nation’s largest retail brokerages held about half of all retail assets. At the end of 2011, that market share had fallen. At the time, Cerulli estimated it to be 41% and was projecting a decline to 34% by the end of 2014.

But the major brokerages, often called wirehouses, performed better than expected. Based on additional data, Cerulli now estimates that the wirehouses’ market share at the end of 2011 was nearly 44% and that they maintained a roughly 42% market share in 2012 and 2013. That dropped to just 41% at the end of last year, according to Cerulli’s most recent estimate.

Industry consolidation is one reason why the gap has narrowed in assets between wirehouses and independent advisors, as big banks continue to strengthen after the fallout from the Great Recession. Also, the number of independent advisors who left big-brand investment firms to either start their own firms, or join fledgling ones just up and running, have slowed down considerably.


Lastly, the stock market has performed so well that investors, especially risk-averse ones, figure that going with a big established brand name is the wise choice, over the newer independent planner with less glitz and flash than a Wells Fargo or JPMorgan Chase (all those television and online ads don’t hurt the big banker’s cause on that front.)

But is it really worth it for an investor to go with a big-name, well, just because it’s a “big name”? The evidence suggests “no” and here are a few compelling reasons why:

Quantity does not translate to quality – The “Big Four” brokers (think Morgan Stanley, Bank of America (Merrill), UBS, and Smith Barney), and JP Morgan Chase) all are flexing their muscles again six years after the biggest taxpayer bailout of financial institution’s in the nation’s history. That’s not good news for Main Street investors and here’s why. Each big wirehouse garnered larger numbers of advisors after the bailouts. For example, Bank of America bails out Merrill Lynch, and the advisor numbers swell from 10,000 to 16,000.

(Studies show that big wirehouses advisors clearly outpace the fees and commissions from average independent broker-dealers

With that influx comes leverage, as Merrill immediately goes to the money managers that sell their products through these brokers and demands higher revenue sharing in a high-handed game of “pay to play.” That’s going to help Bank of America and Merrill Lynch, but not the average investor, whose money may not be going to the best investments.

Focus on the “firm agenda” – Here’s another problem. With bigger asset manager volumes at the large wirehouses, you now have more advisors pushing the firm agenda. In that context, there are no bonuses given for the best client service or the best risk adjusted return. The focus of the “Big Four” is all about asset gathering. That runs counter to the attraction of going independent for those advisors who want to be client focused, and not have to push that firm agenda. Where is the evidence that clients come first under the new trend of wirehouse dominance? It’s certainly not in The Journal story.

Does your cash level measure up? – When it comes to getting the best service from big wirehouses, size matters more so than with individual advisors, who usually don’t have cookie-cutter asset benchmarks to follow in providing comprehensive service. At bigger brokers, the level of personalized services rises as asset volume levels rise. At $5 million, you’re getting some of the best service a broker at a big financial brand can give you, per company policy. But you have more flexibility at smaller firms, where bringing $500,000 in the door doesn’t tie you done to a once-a-year review as it could at a “Big Four Broker.”

As bigger brokerage brands reclaim lost turf with higher client rolls these days, it’s worth it for investors to ask if they’re just paying more than they need to for a big brand name. In many cases, that answer is “no”, and emphatically so.

If you’re not sure you’re getting the maximum performance from your financial advisor, talk to GuardVest – we’ll set you on the right path and guide you to a more beneficial relationship with your advisor. Contact us at and follow us on Twitter at