Big, full-service brokerages have lost a significant chunk of business to online firms that told small investors they are better off making their own decisions, Aite Group said in a report.

In the wake of a financial crisis that shook up the brokerage industry and pummeled portfolios, online brokers took to the airwaves to attack the high commissions and poor performance of full-service brokers during the slump.

The ad campaigns appear to have worked: Discount brokers took in 25 percent more assets from full-service advisory firms than they lost over the past two years, Aite said.

But full-service brokers claimed they were winning the war for clients, the financial services consulting and research firm said.

Advisers must wake up to reality and combat the message coming from the discount brokerage arena, said Adam Honore, research director at Boston-based Aite.

Among more than 400 financial advisers surveyed by Aite, 23 percent said they had lost customers to online brokerages.

Specifically, brokers said the biggest threat was E*Trade Financial Corp -- despite its financial woes -- followed by Charles Schwab Corp , closely held mutual fund giant Fidelity Investments, and TD Ameritrade .

Over the past two years, the average financial adviser lost more than 7 percent of his clients to online firms. Even so, some 70 percent of the full-service advisers surveyed dismissed online firms as a threat.

The survey also found that 22 percent reported losing customers to regional and local brokerages, while another 17 percent saw clients move to independent registered investment advisers (RIA).

Big firms were buffeted by some big changes last year. Hard-hit Citigroup combined its Smith Barney brokerage with a joint venture led by Morgan Stanley ; Merrill Lynch was acquired by Bank of America Corp , another commercial bank roiled by the crisis; and UBS , the Swiss bank, is working through its own financial woes and a series of scandals.

Part of the allure of online firms is better technology. Advisory firms need more competitive online offerings as well as mobile solutions that would encourage customers to stick around, Aite said.

To be sure, full-service firms gained customers from the discount houses, too. The average adviser in the survey said he gained 11 percent of his new clients from online firms. In most cases, the big wirehouse brokerages remain competitive by promoting personal service and a wider array of market expertise beyond buying and selling U.S. stocks.

(Reporting by Joseph A. Giannone; editing by John Wallace)

Investment Merrill Lynch