Is the Grass Greener?
Independent RIA model appealing to many
Eight in 10 advisers at independent broker/dealers (IBDs) and insurance companies
say the idea of being an independent registered investment adviser (RIA) is
appealing, according to a Schwab survey.
The percentage of advisers who find the independent RIA
model appealing increased to 95% if they know someone who has gone that route,
the Schwab Advisor Services survey found.
“We see a growing number of IBD advisers transitioning to
the independent RIA model,” said Nick Georgis, Vice President with Schwab
Advisor Services, a provider of custodial, operational, and trading support for
more than 6,000 independent RIAs. “In our experience with these advisers, the
desire to have more flexibility to develop and grow their own business and the
ability to offer more customized solutions to clients are two significant
drivers of this trend.”
The survey supported Georgis’ sentiment. Advisers 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 positive attributes of becoming an RIA.
With several strong reasons cited as to why the RIA model
has its benefits, the Schwab survey asked what would push IBDs to make the
transition. The top two macroeconomic changes that would increase the
likelihood that an adviser 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 advisers
surveyed, 58% say they would prefer to join an existing firm, while 34% say
they would prefer to start their own firm.
Most IBD advisers consider themselves independent in some
way already—56% feel “somewhat” independent and 36% say they are “completely
independent.” However, they recognize differences between their current model
and the independent RIA model, with 81% of advisers acknowledging that their
business would be different if they were to start or join an independent RIA
The survey also found that an average 82% of IBD advisers’
assets under management are currently in a fee-based model, and there is a
clear trend for most IBD advisers to maintain a primarily fee-based practice or
a mix of commission- and fee-based business. Forty-five percent of advisers
surveyed said their long-term plan is to be mostly or all fee-based, while 46%
indicate they expect to maintain a mix of both commission- and fee-based
business. Only 8% of advisers say their practice will be mostly or all
commission-based as their business evolves over time.
One hundred fifty-seven financial advisers employed by IBDs
and insurance firms participated in the survey.