Wirehouse Broker

What Is a Wirehouse Broker?

A wirehouse broker is a non-independent broker working for a wirehouse firm, or a firm with various branches, for example, a national brokerage house. The four biggest and most notable wirehouse full-service brokerage firms today are Morgan Stanley, Bank of America's Merrill Lynch, UBS, and Wells Fargo. A wirehouse is an old term used to portray a broker-dealer. Modern-day wirehouses can go from small regional brokerages to monster institutions with offices around the world.

The term "wirehouse" owes its beginnings to the way that, prior to the appearance of modern remote communications, brokerage firms were associated with their branches principally through telephone and broadcast wires. This empowered branches to approach a similar market data as the head office, consequently permitting their brokers to give stock quotes and market news to their clients.

A wirehouse broker is commonly a full-service broker, offering research, investment advice, and order execution. By being affiliated with the wirehouse, the broker gains access to the firm's proprietary investment products, research, and technology.

Wirehouse Broker Explained

It was once imagined that to offer top support to their clients, brokers must be affiliated with a wirehouse firm. Independent brokers were frequently assumed to be venders of prepackaged products and were seen as peons in the financial world. Things have changed in such manner. Be that as it may, as a considerable lot of the big wirehouses experienced major shocks in the financial crisis of 2008.

Wirehouses and the Financial Crisis

The global financial crisis prompted exceptional strife among wirehouses, principally in light of the extremely substantial exposure that a large number of them needed to mortgage-backed securities. While a number of the smaller players were forced to close shop, probably the most noticeable names in the industry (like Merrill Lynch and Bear Stearns) were either acquired by bigger banks or disappeared through and through into bankruptcy (Lehman Brothers). These occasions leveled the playing field as wirehouse brokers searched for new options after leaving the failed firms.

Most present-day wirehouses are full-service brokerages that give the complete scope of services to clients, from investment banking and research, to trading and wealth management. Albeit the expansion of discount brokerages and online statements has disintegrated the edge in market data that the wirehouses formerly had, their diversified activities in capital markets keep on making them truly productive substances.

In any case, in recent years, a number of wirehouse brokers have moved to independent broker-dealers. As per research by InvestmentNews, the three biggest U.S. independent broker-dealers — LPL Financial, Ameriprise Financial Inc. also, Raymond James Financial Inc. — enrolled 118 groups from the wirehouses in 2017, up 42% from a year sooner, when those equivalent three firms acquired 83 groups, as per data.