The 10 Biggest BDs Are Getting Bigger: Cerulli

What You Need to Know

The 10 biggest broker-dealers account for 58% of retail advisory assets, the research group finds.
Large BDs are growing their AUM faster than smaller ones.
But an increasing number of advisors dissatisfied with big firms are choosing alternative paths.

The 10 biggest broker-dealer firms by assets under management have 123,000 financial advisors and account for 58% of the total retail financial advisor industry, according to new research from Cerulli Associates. 

The largest firms’ hulking market share, driven by a steady stream of mergers and acquisitions over the past decade, underscores the need for scale to remain competitive in the marketplace, Cerulli said.

Since 2012, one-fifth of the top-25 broker-dealers in terms of their asset base have either been acquired or have merged as firms have felt pressure to increase scale to remain competitive and maximize profit margins, according to the research. 

Very large broker-dealers have leveraged their scale and capital positions to outgrow their smaller counterparts, with a five-year compound annual growth rate of assets under management of 8.4%, compared with 6.6% and 6.9% annualized growth rates for large and medium-sized firms.

Financial advisors and asset managers seeking shelf space are attracted to the size and scale that these large firms offer. 

“The advantages of scale for BDs include the ability to spread fixed investments in areas such as infrastructure, technology and regulatory compliance across a larger advisorforce, which increases the return on those investments,” Michael Rose, director of wealth management at Cerulli, said in a statement.