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In a new Schwab Advisor Services survey of advisors employed at independent broker dealers (IBDs) and insurance companies, more than eight out of ten (86%) say that the idea of being an independent registered investment advisor (RIA) is appealing. Among advisors that know someone who started or joined an RIA firm, an overwhelming 95 percent say they find the RIA model appealing.
“We see a growing number of IBD advisors transitioning to the independent RIA model,” said
Georgis noted that Schwab saw a 45 percent increase in the number of advisor teams transitioning to independence from IBD firms in 2010 compared to 2009.
Of the nearly 160 IBD-affiliated advisors surveyed, most consider themselves independent in some way today – 56 percent feel “somewhat” independent and 36 percent say they are “completely independent.” But they recognize differences between their current model and the independent RIA model, with 81 percent of advisors acknowledging that their business would be different if they were to start or join an independent RIA firm.
Advisors at IBDs see a number of benefits to joining or starting an independent RIA firm, including greater ability to develop and grow their own business (43%), deliver more customized solutions (42%) and hand pick their own team (41%) as the top three positives.
The top two macroeconomic changes that would increase the likelihood that an advisor would transition to a fully independent RIA are a friendlier economic and tax environment for small business owners (45%) and an improved overall market and economic environment (43%). Of the advisors surveyed, 58 percent say they would prefer to join an existing firm, while approximately one-third (34%) say they would prefer to start their own firm.
The survey also finds that an average 82 percent of IBD advisors’ assets under management are currently in a fee-based model, and there is a clear trend toward most IBD advisors maintaining a primarily fee-based practice or a mix of commission- and fee-based business. Forty-five percent of advisors surveyed say their long-term plan is to be mostly or all fee-based, while 46 percent indicate they expect to maintain a mix of both commission- and fee-based business. Only eight percent of advisors say their practice will be mostly or all commission-based as their business evolves over time.
The two biggest potential advantages to a fee-based model cited by advisors in the survey are providing an easier to understand pricing model for clients (62%) and having greater predictability in revenue (61%). About the Survey One hundred fifty-seven financial advisors employed by independent broker dealers and insurance firms participated in the survey, conducted by
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