Wirehouse Broker: What They do, During the Financial Crisis

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Will Kenton
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Will Kenton is an expert on the economy and investing laws and regulations. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU.
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Updated April 02, 2024
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Andy Smith
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Reviewed by Andy Smith
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Andy Smith is a Certified Financial Planner (CFP®), licensed realtor and educator with over 35 years of diverse financial management experience. He is an expert on personal finance, corporate finance and real estate and has assisted thousands of clients in meeting their financial goals over his career.

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What Is a Wirehouse Broker?

A wirehouse broker advises clients and trades stocks and other assets on their behalf as an employee of a full-service brokerage house. The word "wirehouse" implies that they are employed by one of the big players rather than working on their own or with an independent broker-dealer company.

The four largest and best-known full-service wirehouse brokerage firms today are Morgan Stanley, Bank of America’s Merrill Lynch, UBS, and Wells Fargo.

"Wirehouse" is an archaic term for a broker-dealer.

Key Takeaways

  • Wirehouse is an archaic name for a full-service brokerage house, particularly one of the biggest players.
  • The name referred to the telegraph and telephone lines that allowed big brokerages to share the latest stock information with their remote offices and execute trades quickly.
  • Today's brokers, whether they work for a wirehouse or independently, have access to much the same information and market access via the internet.

13,000

The number of financial advisors that Merrill Lynch has on its payroll. Morgan Stanley has nearly 17,000.

Wirehouse Broker Explained

Before the advent of modern wireless communications, brokerage firms were connected to their branches primarily through telephone and telegraph wires. This gave branch offices access to the same market information as the head office, allowing brokers to provide stock quotes and market news to their clients.

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

It was once thought that only brokers affiliated with the largest wirehouse firms could provide top service to their clients. Independent brokers were often assumed to be sellers of prepackaged products and were viewed as second-class citizens in the financial world.

Things have changed in this regard as an independent broker has access to top-quality research.

Wirehouses and the Financial Crisis

The global financial crisis led to unprecedented turmoil at wirehouses, primarily because of the very substantial exposure that many of them had to mortgage-backed securities at the time they collapsed.

A number of the smaller players were forced to close shop. Some of the most prominent names in the industry, such as Merrill Lynch and Bear Stearns, were acquired by bigger banks. Some disappeared into bankruptcy (notably Lehman Brothers).

These events served to level the playing field as wirehouse brokers looked for new options after leaving the failed firms.

Wirehouses and Independents Today

Most present-day wirehouses are full-service brokerages that provide a complete range of services to clients, from investment banking and research to trading and wealth management. Although the proliferation of discount brokerages and online quotes has eroded the edge in market information that the wirehouses formerly possessed, their diversified activities in capital markets continue to make them very profitable entities.

Nevertheless, some wirehouse brokers have opted to work as independents. Independent broker-dealers such as Raymond James and Ameriprise have been morphing into wealth management advisors. By 2023, they had 6,545 associates managing $295.3 billion in client assets.

What Is the Difference Between a Wirehouse and a Brokerage?

All wirehouses are brokerages, but not all brokerages are wirehouses. The wirehouse label is usually attached to the largest full-service brokerage houses whose employees supply their clients with research, in-house analysis, and trading services. Some brokers work independently or are associated with independent dealer-broker firms rather than wirehouses.

How Many Wirehouses Are There?

Strictly speaking, there are only four wirehouses: Morgan Stanley, Bank of America’s Merrill Lynch, UBS, and Wells Fargo. There were about 3,378 broker-deal firms, many of them independents, operating in the U.S. as of 2022.

Do Wirehouses Still Use Telephone and Telegraph Wires?

No. Wirehouses don't use telephone and telegraph wires any longer. They use the internet, just like the rest of us. They don't even have those noisy machines that pumped out streams of stock prices printed on ticker tape and ready-made for tossing out the windows during parades. That was a telegraph technology, too.

The Bottom Line

There are only four firms that can be reasonably described as wirehouses today. The Big Four are Morgan Stanley, Bank of America’s Merrill Lynch, UBS, and Wells Fargo. But they have thousands of smaller competitors who can be described as independent broker-dealers, wealth management advisors, or just plain brokerages.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

  1. Morgan Stanley. "Investment Advisory Services for Today's Complex Markets."

  2. Merrill Lynch. "Let's Build a Plan All About You." Select "Our Advisors."

  3. University of Maryland, Baltimore. "Case Study of the Merger Between Bank of America and Merrill Lynch."

  4. Financial Planning. "$285B in Assets, 6500 Advisors: 2023's Biggest IBD Recruiting and M&A Deals."

  5. Think Advisor. "What the Broker-Dealer Industry Looks Like Now, in 5 Charts." Click "Start Slideshow."

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