The Slow Death of the Big Bank Model

For more than a decade, wirehouses and large, bank-owned firms have been buoyed by an extraordinarily positive market that has lifted assets under management and margins.

Rising markets helped Morgan Stanley reach peak margins of roughly 30%. Merrill Lynch and UBS have also posted improved financial performance—despite making few meaningful strategic changes to address the structural challenges eroding their market share.

Fee-based revenue has masked deeper fractures. Those weaknesses will become increasingly visible as demographic, technological, and economic pressures converge.

The Demographic Dilemma

The average age of advisors at large firms now sits in the mid-50s—and is climbing rapidly. Most began their careers at wirehouses or their predecessors, creating the industry’s highest concentration of advisors with 40-plus years of experience.

Even their favored consultant, McKinsey & Co., has sounded the alarm. Its 2025 research indicates that more than 110,000 advisors will retire over the next five to eight years, representing roughly one-third of the industry.

That attrition comes at precisely the wrong moment:

• S. household wealth continues to grow
• Trillions of dollars are set to transfer from baby boomers to heirs
• The industry faces a projected net shortfall of nearly 100,000 advisors 

Wirehouses’ long-standing strategy—poaching experienced advisors from one another—is no longer viable. Firms will need to add 370,000 advisors to meet demand, yet only about 27,000 advisors change firms annually, according to McKinsey.

Wirehouses thrive on scale. And scale requires both headcount growth and continuity across millions of client relationships—exactly what’s now at risk.

The Revolving Door Is Broken

For decades, the wirehouse labor market functioned like clockwork. Roughly 5% of advisors would leave each year—and firms could reliably backfill by hiring 5% from rivals.

Many executives still hope that playbook will work.

UBS recently hired a highly compensated recruiting chief from Morgan Stanley, signaling continued commitment to veteran broker recruiting. All four wirehouses still spend billions on forgivable loans to keep the door spinning.

But the mechanism is broken.

Advisor departures are no longer cyclical—they’re permanent. Advisors aren’t rotating within the wirehouse ecosystem; they’re exiting it altogether. Increasingly, they’re launching independent RIAs or joining boutique firms offering:

• Better economics
• Greater autonomy
• Genuine ownership

It’s no coincidence that wirehouses no longer disclose advisor headcount. UBS—the smallest wirehouse by headcount—has seen its advisor ranks shrink nearly 20% over the past decade, falling to fewer than 5,800 advisors, down from 7,140 in 2015.

Executives argue they can thrive with fewer advisors. But scale has always been their economic engine. Even without cold-calling stockbrokers, firms still need advisors to gather, manage, and retain assets.

Meanwhile, the rebuild pipeline is thin. Training programs remain expensive and slow. While junior advisors can join teams, many senior advisors hesitate to entrust clients to unproven successors.

Rising Costs Pressure Margins

Cost pressures are intensifying—and directly undermining scale economics.

Expenses are rising across multiple fronts:

• Heavy investment in AI and digital infrastructure
• Expanding regulatory and compliance demands
• Escalating cybersecurity and operational risk management

These challenges are compounded by legacy structures—large real-estate footprints and layered management—that weigh heavily on profitability.

The Commoditization of Custody

The traditional wirehouse value proposition has steadily eroded.

Advisors once relied on their firms for:

• Proprietary research
• Exclusive products
• Capital markets access and IPO allocations

Today, product menus have converged. Platforms like iCapital have democratized alternatives. Large asset managers increasingly distribute through RIAs, offering access to sought-after funds from firms like Apollo.

The logos may differ—Schwab, Fidelity, Pershing, Goldman Sachs—but the underlying offerings are nearly identical.

As a result, advisors are no longer willing to surrender 50% of revenue for a back office that delivers diminishing marginal value. Independence now offers:

• Superior long-term economics
• Open architecture
• Meaningful flexibility

Legacy Technology Built for the Masses

Technology, once a competitive advantage, has become a liability.

Wirehouse platforms remain burdened by decades of patchworked systems and internal bureaucracy. Core workflows—from account opening to asset transfers—are slower, more manual, and less transparent.

Independent firms benefit from clean-sheet technology builds designed to eliminate friction. The gap continues to widen.

At large banks, account-opening timelines can stretch two to three weeks. On independent platforms, the same process often takes less than 90 seconds, completed with a single DocuSign signature.

Equity and Ownership Change Everything

For years, wirehouses retained advisors through recruiting packages worth 300% to 400% of annual production—the price of surrendering ownership and accepting long-term contractual handcuffs.

That leverage is fading.

Private capital has reshaped the landscape, unlocking equity value for advisors who have built sizable, sophisticated practices. Advisors now enjoy unprecedented flexibility in succession planning:

• Monetizing a minority stake without ceding control
• Partnering with independence platforms that enhance enterprise value

A $3-million producer can command six to eight times EBOC for a minority sale—often taxed at capital gains rates. Wirehouse deals, by contrast, are taxed as ordinary W-2 income.

There is no realistic way for bank-owned firms to match the flexibility, economics, and alignment available in the open market—short of relying on inertia.

An Uncomfortable Conclusion

As Morgan Stanley’s CEO observed last year, the firm last reached 30% margins during the 1999–2000 dot-com bubble. History suggests such periods are often followed by turmoil and consolidation.

The big bank model won’t collapse overnight. These firms are led by capable, well-compensated executives. Yet despite incremental adjustments, the core playbook remains unchanged.

Firms are grasping for growth—leaning on corporate stock-plan clients, 401(k) relationships, and adjacent businesses—as traditional engines stall.

The industry has cycled through consolidation before. Large firms rise, fall, and are absorbed into even larger institutions. Every wirehouse today has a family tree littered with firms that didn’t survive the full cycle.

Markets may continue to support the big four for a while longer. But history suggests not indefinitely. As conditions shift, the structural weaknesses of the big bank model will become increasingly difficult to ignore.