Direct Providers Threaten Advisors’ Client Base: Cerulli

Advisors stand to lose clients to direct providers, according to new data from Cerulli, and most do not even know that their clients may maintain direct accounts.

Those advisors most in jeopardy are those who compete most directly with providers such as Schwab, Fidelity and E*Trade. Those providers have devoted considerable time and expense to building platforms that offer a broad range of services also offered by full-service brokers such as Merrill Lynch and other wirehouses. In addition, they have not suffered the reputational damage that the financial crisis of 2008 brought to many of the largest names in the business.

However, even if you are an independent advisor and not connected with a wirehouse, the threat looms for you as well–particularly if your client base has investable assets of between $100,000 and $2 million in investable assets. Your clients may have direct accounts that you are unaware of, and they may have chosen not to enlighten you.

So said Katharine Wolf, associate director at Cerulli Associates, in a statement. “For clients with between $100,000 and $2 million in investable assets, direct firms and advisors compete head-on for client relationships,” Wolf explained. “Investors who do not want to pay for advice or who have not been approached by an advisor often default into the direct model, as direct firms generally have well-known brands and solid reputations.”