Have you ever heard of the term “wire house?” It’s a term used in the investment business to designate national or international brokerage firms whose branch offices are linked by a communications system that permits rapid dissemination of prices, information and research relating to financial markets and individual securities.
The designation dates back to the time when only the largest organizations had access to high-speed communication. Of course today everyone with a computer and a modem has access to the kind of instant information that made the wire houses different.
The universal availability of real-time information on prices, research and market direction have made it possible for individuals and groups who are willing and able to provide more personalized service to their clients to break away from the wire houses and form RIAs (Registered Investment Advisory firms). The benefits of RIAs include a higher level of service, unbiased advice not linked to a wire house’s investment banking relationships and a broader array of investment products. In addition, the typical RIA is not pressured to “sell” products to his clients while the typical wire house broker can be fired for failing to meet sales and production goals.
It’s one of the reasons that RIAs are growing faster than the wire houses, or, as we call them, the “big box stores.”