For Wirehouses, ‘Small’ Accounts Are Now $500K, And The Line Keeps Moving

It started at $100,000, moved to $250,000, and is now $500,000. At the largest wealth management firms, the definition of a "small" household keeps getting larger. And with inflation and efficiencies created by artificial intelligence, there is little reason to believe it will stop there.

Merrill, in its 2026 compensation plan, reduced payout to 20% on households between $250,000 and $500,000. That doubled the threshold from $250,000—below which advisors receive no pay—as executives said the old definition no longer reflected market conditions.

Morgan Stanley moved in the same direction, raising the floor to $300,000, with exceptions. While firms do not fully restrict advisors from serving smaller accounts, the economics make it difficult.

While advisors generally do like moving upmarket, account minimums create a problem for those who are starting out or trying to reach emerging-affluent clients. Many ultra-wealthy customers started out as $250,000 accounts that later moved over large company stock holdings or retirement accounts.

The same goes for early-career doctors or lawyers whose current investable assets may understate their long-term value. Many customers will give advisors a small portion of assets to handle as a test before transferring their full net worth.

The long tail of client relationships, which often grow into larger, more profitable households over time, gets cut off before it compounds. And the ability to control one's own business diminishes as firms centralize more of the client experience.

The firms' rationale is straightforward: standardized service improves margins and allows traditional advisors to concentrate on larger, more profitable relationships. A smaller household can instead be directed to a centralized platform that costs less to operate while keeping the assets inside the company.

As artificial intelligence and robo-platforms grow, we're likely to see that number shoot up beyond the $500,000 mark. AI-driven portfolio construction, rebalancing, tax optimization, and basic financial planning are advancing quickly. More importantly, they are becoming dramatically cheaper at scale.

What once required a team of analysts and advisors can increasingly be delivered through algorithms and centralized systems with minimal marginal cost. The firms want to capture that margin.

That raises practical questions for advisors. Will you have to take a lower payout or jettison some $750,000 or $1 million accounts? Are you comfortable sending those clients to a call center CFP or risk losing them to an advisor at a nearby RIA willing to accept near-term economics? And without those accounts, who will senior advisors have to hand off to a potential successor still building their practice?

For advisors planning for where their practice will be over the next decade, it is a key question as to how their book will be affected when those limits increase. It's not just about compensation but also about who determines which clients are worth serving, how you build your book, and what your practice will look like in the next decade.

Instead of serving as the primary relationship manager across a broad client base, advisors are going to be pushed to the top end of the market for ultra-high-net-worth relationships while firms systematize everyone below that threshold with an AI-based financial plan and an S&P 500 index.

The math is not complicated for firms, and their direction is clear.