Broker migration thought likely to boost channel growth of the past decade. With turmoil on Wall Street expected to result in increased flows of former wirehouse brokers to independent channels, independent broker-dealers are becoming increasingly important as distributors of separately managed accounts (SMAs).

Growth channel

Ameriprise Financial, LPL Financial and Raymond James already account for, respectively, 27%, 26% and 18% of independent-channel SMA assets, according to Cerulli Associates, a Boston-based financial-market research firm. With mergers touching Merrill Lynch and Wachovia, two of the three biggest wirehouse-channel SMA distributors, and brand and asset erosion seen impacting Citigroup's Smith Barney, UBS' U.S. brokerage arm and Morgan Stanley, it's thought likely that employees of these firms will make tracks to independent firms -- and so increase SMA uptake at their new homes.

Wirehouses dominate the SMA space, accounting for about 70% distribution by asset value. Independent broker-dealers and insurance brokerages come next, with about 15%. But where the wirehouses have lost ground relative to other channels by 12% over the past 10 years, independent broker-dealers and insurance brokerages have seen a 93% increase from 1998. Third-party investment-platform providers -- which do the bulk of their business through independents -- accounts for another 10% of SMA assets, easily bringing the total SMA market share distributed through independents past the 20% mark, according to Cerulli. -FWR

Purchase reproduction rights to this article.