The Role of Wirehouses and National/Regional Broker-Dealers in a Growing Financial Planning Profession

The Wirehouses: Four national broker-dealers with a large Wall Street investment banking and institutional presence and strong penetration in metropolitan money centers. Key characteristics:

• Large national advisor and branch advisor networks.
• Control largest percentage of industry assets.
• Advisors operate at highest level of productivity.

The National & Regional Broker-Dealer: National and regional financial services companies with retail financial advisors; national broker-dealers targeting clients with moderate wealth; and boutique firms with a localized presence. Key characteristics:

• Wide range of firm sizes, from small boutiques to 1,000+ advisors.
• Often have strong regional and community ties.
• Varied institutional and investment banking services, depending on the firm.
• Few or no proprietary products.

Source: CFP Board Guide to Careers in Financial Planning

Wirehouses and national/regional broker-dealers (BDs) represent some of the largest and most-well known names in finance. This is a large category of firms. Four firms with Wall Street roots that stretch out across the country comprise the wirehouses: Morgan Stanley, Bank of America Merrill Lynch, Wells Fargo and UBS. National/regional BDs covers an even broader range of companies. There are large national players, like Edward Jones and Ameriprise, as well as boutique firms like Janney Montgomery Scott and independent firms like Kestra Financial and Raymond James.

Collectively, these two broad groups employ more than 143,000 financial advisors, according to data from Cerulli’s Q1 2022 Advisor Edition featured in Financial Planning earlier this year. Because of their sheer size, these channels play a substantial role in providing the training and real-world planning experience that CFP® professionals need to start and grow their careers. This also means these firms are one of the primary ways that Americans receive financial advice.

How do financial advisors in these channels approach financial planning? What aspects of these firms make them attractive places to either start or continue a career?

An Increased Focus on Planning

Over the last decade, like much of the broader wealth management industry, wirehouses and national/regional BDs have undergone a profound mindset shift toward their approach to client service.

“Ten years ago, clients were very focused on investment advice,” says Ken Couser, CFP®, Director of Financial Planning at Janney Montgomery Scott, a boutique BD. “It feels like a lifetime ago. We were just coming out of the recession, so clients were trying to figure out what the next best thing was.”

Now, he says clients are recognizing the value of working with an advisor and asking for financial planning.

“The shift has gone from how much return can we generate to what’s the best investment to meet your goals. Instead of solely trying to outperform the market, the conversations with clients are more about how much risk do we really need to take to achieve your goal — whether its retirement, education or buying a house.”

Kenneth Correa, CFP®, Managing Director at Merrill Lynch has noticed a profound shift from a focus on product to a focus on planning at wirehouses after more than two decades in the industry.

“When you think about the wirehouse industry in the 80s or early 90s, it was much more of a product-led approach,” says Correa. “I think where planning has been critical for our industry is that it provides the connective tissue between all of our services. At its core, financial planning is all about asking questions and getting an understanding from the client what they are trying to accomplish with their assets. This enables our advisors to tap various parts of our business — lending, investment advice, banking — depending on the client’s goal.”

Firms are taking notice of the trend and devoting more resources to planning. Jen Hollers, CFP® recently joined Kestra Financial as Head of Financial Planning to help the independent BD launch a new financial planning platform.

In her role, Hollers will help Kestra’s body of financial professionals transition their client relationships from being primarily focused on investment management to a more holistic, inclusive financial planning experience, according to her appointment announcement.

This shift can also be seen in the way clients pay for financial planning services, which comes down to flexibility and need based on the complexity of the plan.

For example, advisors within Kestra’s network offer financial planning services in several different ways, according to Hollers. Some clients may choose to pay flat fees for one plan option (which can then be altered depending on the complexity) while other clients may prefer to pay a monthly or quarterly subscription fee or as a part of the fee for managing assets. In other parts of the BD channel, like at Janney, financial planning services can be included as part of a client’s advisory services.

Planning at Scale: Centralized Knowledge and Resources

With the resources of a financial institution at their disposal, financial planners who work at wirehouses and national/regional BDs can tap into a wealth of expertise that complements their own.

“At Kestra, we are a large national broker-dealer with advisors spread out across the country and they’re all contributing in some way to our financial planning brain trust,” says Hollers.

“We all benefit from a shared knowledge base built from professionals with different specialties. We’ll often identify an advisor in our ranks who might be really good at tax planning, glean that knowledge from them and then share it with the rest of the body of advisors.”

“We all benefit from a shared knowledge base built from professionals with different specialties. We’ll often identify an advisor in our ranks who might be really good at tax planning, glean that knowledge from them and then share it with the rest of the body of advisors.”

In his role as the head of Janney’s financial planning department, Couser leads a team of financial planners that offer planning-specific services to the broker-dealer’s advisory clients. His team sits alongside investment management, insurance as well as attorneys on staff that can implement the plans his team develops.

“The biggest opportunity that Janney provides for advisors would be the services and support available at the firm. If through the financial planning process we discover that the client might need some insurance coverage, Janney has an insurance department that can help the client and their advisor walk through what the best insurance product may be for them.”

This “one-stop shop” aspect can be appealing for clients as well. Instead of talking to three or four different people to pursue trust or estate planning and execution, a client can speak with one person — their advisor — and receive a uniform answer. In this situation, the advisor becomes more of a quarterback for the client relationship rather than the client needing to actually formulate their own team.

Speaking to this feature at wirehouses and large BDs, Correa believes that this factor gives wirehouses a competitive edge. “We’re able to offer all of these services in one package to a client rather than offering them piecemeal through another provider or platform.”

The Power of the Larger Platform and Brand Recognition

Trust is an essential component of any client relationship

“When clients aren’t familiar with the name of your firm, it can be more challenging for them to accept your recommendation,” says Couser. “You of course still need to make sure you’re filling your client’s needs, but instead of that initial reaction of the client being one of distrust, it starts out as a trusting relationship because of the name brand.”

Starting out at a larger firm can also be really impactful for new advisors adds Holler.

“Because of the robust training that larger firms typically provide, newer advisors can establish really good habits early in their careers and will have opportunities to learn from multiple different parts of the business.”

“Because of the robust training that larger firms typically provide, newer advisors can establish really good habits early in their careers and will have opportunities to learn from multiple different parts of the business.”

This sets early-stage advisors up really well to gather referrals to build their own practice and allows them to perfect their skills.

The benefits of the larger platform become even more pronounced at the wirehouses. According to Correa, Merrill Lynch, via the Bank of America platform, banks nearly one-in-two households in the United States — a massive network to grow a practice.

“The size of a firm matters, scale matters — especially to clients,” adds Correa. “We spend $1.6 billion on cybersecurity capabilities, which is just hard for smaller outlets to match. It builds immediate trust with clients. In a recent new business pitch, we won a client mandate with a family office because we led the pitch with the safety of their assets.”

Biggest Trend? More Demand for Training and Resources

“As we’ve started sharing more planning information with our field of our advisors, they want more and more information,” says Couser. “Clients are starting to come with more detailed questions — not just asking about retiring at 60 or 65. We’re getting more into estate planning, we’re building trust documents and we’re starting to think about gifting strategies. We’re seeing more complicated financial planning topics starting to emerge for clients, which means that we need more training to cover those areas.”

At her firm, Hollers is hoping to meet some of this demand through training programs. In her new role as Head of Planning, she’s introduced a paraplanning program with the intent of creating more and better planning services, followed by an advanced planning program that’s concentrated and focused on financial planning training for advisors.

As firms contemplate moving from a designation policy to a designation strategy to better provide financial planning via CFP® professionals, an emphasis on training and continuing education will be critical to retain talent.

Despite recent investments into robo-advice and retail-facing platforms from wirehouses like Morgan Stanley, Merrill Lynch and UBS, both Hollers and Couser don’t see this trend having much of an impact on their day-to-day work. They point out that robo-advisors can often answer baseline questions but won’t be able to dig in some of the underlying trends a client may not think about asking.