Advisors

Wall Street Giving Up on “Small” Clients

More and more signs point to the big Wall Street brokerage firms cutting ties with “smaller” clients in 2016. The overall trend in the industry has been to target higher-net worth individuals, ever since Hedgeable was the first digital advisor to lower it’s minimum to $0. This has squeezed the traditional firms, who have a hard time servicing regular sized balances (what they would call “small”) and attracting younger clients. Wealth accumulation in the US is directly correlated to age. So not only are average balances at the traditional Wall Street firms going up, but the average age of their client bases are going up along with them.

A few weeks ago, Wells Fargo announced they will be offering their advisors bonuses if 75% of their clients have $250k or more invested. Clients with less than $65,000 will be transitioned to trainees and other salaried professionals (I would think in a call center) — while the advisors try to sell higher margin products to high-net worth individuals.

But Wells Fargo is actually taking much less drastic measures than many of their peers, and $65,000 is still a very competitive minimum for a full-service firm. Merrill Lynch announced last year that brokers would be required to fulfill a “small-household” policy that requires advisors to dump clients with less than $250,000. Firms like Morgan Stanley and JP Morgan almost exclusively work with private banking clients with $1 million and up. Even Wells Fargo now has a private bank with a $50 Million minimum investment!

So where does that leave the American middle class and HENRYs (high earning, not rich yet)? This is why so many people are turning to Hedgeable and other players disrupting digital investing like Robinhood and Motif. It is important that we all continue to innovate for the mass market and work on product development, automation, and democratization. Just remember, there are over 20 Million professionals under the age of 40 in the United States alone, and they control over $2 Trillion in assets. We will continue to work to democratize the market so everyone has a fair shot at growing their wealth!

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