What Is a Wirehouse Broker?
A wirehouse broker advises clients and trades stocks and other assets on their behalf as an employee of a full-service brokerage house. The word "wirehouse" implies that they are employed by one of the big players rather than working on their own or with an independent broker-dealer company.
The four largest and best-known full-service wirehouse brokerage firms today are Morgan Stanley, Bank of America’s Merrill Lynch, UBS, and Wells Fargo.
"Wirehouse" is an archaic term for a broker-dealer.
Key Takeaways
- Wirehouse is an archaic name for a full-service brokerage house, particularly one of the biggest players.
- The name referred to the telegraph and telephone lines that allowed big brokerages to share the latest stock information with their remote offices and execute trades quickly.
- Today's brokers, whether they work for a wirehouse or independently, have access to much the same information and market access via the internet.
13,000
The number of financial advisors that Merrill Lynch has on its payroll. Morgan Stanley has nearly 17,000.
Wirehouse Broker Explained
Before the advent of modern wireless communications, brokerage firms were connected to their branches primarily through telephone and telegraph wires. This gave branch offices access to the same market information as the head office, allowing brokers to provide stock quotes and market news to their clients.
A wirehouse broker, then and now, is typically a full-service broker that offers research, investment advice, and order execution. By being affiliated with a wirehouse, the broker gains access to the firm's proprietary investment products, research, and technology.
It was once thought that only brokers affiliated with the largest wirehouse firms could provide top service to their clients. Independent brokers were often assumed to be sellers of prepackaged products and were viewed as second-class citizens in the financial world.
Things have changed in this regard as an independent broker has access to top-quality research.
Wirehouses and the Financial Crisis
The global financial crisis led to unprecedented turmoil at wirehouses, primarily because of the very substantial exposure that many of them had to mortgage-backed securities at the time they collapsed.
A number of the smaller players were forced to close shop. Some of the most prominent names in the industry, such as Merrill Lynch and Bear Stearns, were acquired by bigger banks. Some disappeared into bankruptcy (notably Lehman Brothers).
These events served to level the playing field as wirehouse brokers looked for new options after leaving the failed firms.
Wirehouses and Independents Today
Most present-day wirehouses are full-service brokerages that provide a complete range of services to clients, from investment banking and research to trading and wealth management. Although the proliferation of discount brokerages and online quotes has eroded the edge in market information that the wirehouses formerly possessed, their diversified activities in capital markets continue to make them very profitable entities.
Nevertheless, some wirehouse brokers have opted to work as independents. Independent broker-dealers such as Raymond James and Ameriprise have been morphing into wealth management advisors. By 2023, they had 6,545 associates managing $295.3 billion in client assets.
What Is the Difference Between a Wirehouse and a Brokerage?
All wirehouses are brokerages, but not all brokerages are wirehouses. The wirehouse label is usually attached to the largest full-service brokerage houses whose employees supply their clients with research, in-house analysis, and trading services. Some brokers work independently or are associated with independent dealer-broker firms rather than wirehouses.
How Many Wirehouses Are There?
Strictly speaking, there are only four wirehouses: Morgan Stanley, Bank of America’s Merrill Lynch, UBS, and Wells Fargo. There were about 3,378 broker-deal firms, many of them independents, operating in the U.S. as of 2022.
Do Wirehouses Still Use Telephone and Telegraph Wires?
No. Wirehouses don't use telephone and telegraph wires any longer. They use the internet, just like the rest of us. They don't even have those noisy machines that pumped out streams of stock prices printed on ticker tape and ready-made for tossing out the windows during parades. That was a telegraph technology, too.
The Bottom Line
There are only four firms that can be reasonably described as wirehouses today. The Big Four are Morgan Stanley, Bank of America’s Merrill Lynch, UBS, and Wells Fargo. But they have thousands of smaller competitors who can be described as independent broker-dealers, wealth management advisors, or just plain brokerages.
FAQs
More options mean advisors can proactively pick the best business model and firm rather than remaining in the wirehouse world by default. 2. Capabilities and client comfort with the independent space are only increasing. All else equal, most advisors would opt for a higher payout, business ownership, and more autonomy.
What do wirehouses do? ›
A wirehouse is a large, full-service brokerage firm that operates on a national or international scale. These institutions, also known as wirehouse brokerage firms or wirehouse banks, typically offer a range of financial services, including investment banking, asset management, wealth management and brokerage services.
Who are the largest wirehouse broker-dealers? ›
In the US, some of the largest wirehouses are Bank of America/Merrill Lynch, Goldman Sachs, Wells Fargo, and JP Morgan Chase, just to name a few.
What is the difference between a wirehouse and a brokerage firm? ›
A wirehouse usually operates under a fee-based structure, where they charge their clients a percentage of their assets under management (AUM). They may also charge a flat fee for their financial advisory services. On the other hand, broker-dealers charge their clients commissions from trades earned by their clients.
Why advisors are quitting? ›
Poor Prospecting Strategies
And this is where many advisors get it wrong. They spend too many resources on strategies like cold calling and buying a lead list, and they try every new tool that comes along — but they never actually get it. They keep doing this until they end up frustrated and quit.
Can I terminate my financial advisor? ›
Instructions on how to terminate the relationship. Often, you are required to provide the advisor with a signed letter formally terminating the relationship (more on that soon). Fees. Often, a termination fee or other fees are involved in terminating your relationship with the advisor and pulling your money out.
Who are the big four wirehouses? ›
There are only four firms that can be reasonably described as wirehouses today. The Big Four are Morgan Stanley, Bank of America's Merrill Lynch, UBS, and Wells Fargo.
Who is the largest independent broker-dealer? ›
Top Independent Broker-Dealers in the USA | 5-Star Broker-Dealers
- LPL Financial. Fees (2023): $4,135,681,000
- Northwestern Mutual. Fees (2023): $1,709,405,000
- Commonwealth Financial Network. Fees (2023): $1,611,255,947
- MML Investors Services LLC. Fees (2023): $935,700,000
- Kestra Financial Inc. ...
- Centaurus Financial Inc.
This will be another year of transition at the four wirehouses – Merrill Lynch, Morgan Stanley, Wells Fargo Advisors, and UBS – as each seeks to find stability after last year's significant changes.
Who is the number 1 online broker? ›
Summary: Best Online Brokerage
| Company | Forbes Advisor Rating | BEST FOR |
|---|
| TD Ameritrade | 4.4 | Best Online Broker For Beginners And Best For Mobile App Users |
| Fidelity Investments | 4.4 | Best Online Broker For Everyday Investors |
| Charles Schwab | 4.3 | Best Online Broker For Customer Service |
| Tastytrade | 3.9 | Best Online Broker For Options Trading |
1 more rowAug 30, 2024
Most wirehouse advisors consider themselves fiduciaries. That is, in practice, they make every attempt to put clients first and make all decisions with their best interests in mind.
Is Edward Jones considered a wirehouse? ›
“For a number of years, Edward Jones ended up looking like a wirehouse, as a training ground for independent firms, but that won't be the case going forward,” the executive said. “It's really beefing up internal offerings that the advisors can use or sell to the public.
Is Raymond James considered a wirehouse? ›
While Raymond James has the capabilities of a wirehouse firm, there are some notable differences. First and foremost, Raymond James recognizes that the most important relationship is the one that exists between you and your clients.
Is an RIA a fiduciary? ›
RIAs must act as fiduciaries, meaning that they must act in clients' best interests and avoid any conflict of interest concerning products and services offered to them.
Why are they called brokers? ›
The word "broker" derives from Old French broceur "small trader", of uncertain origin, but possibly from Old French brocheor meaning "wine retailer", which comes from the verb brochier, or "to broach (a keg)".
Why are so many financial advisors leaving Merrill? ›
Beyond that, advisors felt that Merrill's limitations, demands, and pressure to put clients in banking products that didn't make sense (read violation of Reg BI for which there are consequences) led to significant client attrition.
Why Merrill Lynch support staff is leaving? ›
Overwhelming workloads, back-to-office complaints, and frustrations over pay: Why Merrill Lynch's support staff is leaving. Bank of America's wealth-management arm says it values client associates, the staffers who help run financial advisors' practices.
Are financial advisors declining? ›
The firm's latest study, “The Cerulli Report—U.S. Advisor Metrics 2023,” finds that over the next decade, 109,093 advisors, or 37.5% of the industry headcount, are set to retire—and will take 41.5% of the industry's total assets with them as a result.
Will there be a shortage of financial advisors? ›
Nearly 40 percent of financial advisors are expected to retire in the next decade, and the replacement rate is not keeping up. Based on those simple facts, it's plain to see the wealth management industry is on the cusp of a demographic nightmare.
