Biggest Growth for Dually Registered Advisers

Assets grew 19.1% in 2011 for advisers registered both as registered investment advisers (RIAs) and as brokers, Cerulli found.
Such advisers are registered as RIAs with the Securities and Exchange Commission (SEC) or state regulators, and as brokers with FINRA, Cerulli said in a report based on three separate surveys of financial advisers and RIAs, asset managers and variable annuity-focused wholesalers.

The biggest motivation to become dually registered is higher payouts, practice autonomy, a reduction in conflicts of interest among clients, the ability to charge both commissions and fees—and while maintaining connection with broker/dealer support services, Cerulli said. This channel is especially popular among legacy independent broker/dealers (IDBs) and advisers, according to the Boston-based research firm. New recruits have also hailed from wirehouses, regionals and private banks.

Meanwhile, assets of RIAs increased 14.7% in 2011, and wirehouses lost $150 billion in assets to adviser transitions during the year, with the bulk going to IDBs, Cerulli said.

However, it should be noted that dually registered advisers and IBDs still hold a far smaller market share of advisers and assets, Cerulli noted. In 2011, dually registered advisers held just 7.9% of assets and 5.8% of financial advisers. For RIAs, these figures are 12.2% and 9.1%, respectively. By comparison, wirehouses manage 41.1% of asset and employ 16.3% of the nation’s advisers.



The tides are turning, however. By 2014, Cerulli projects that dually registered advisers’ market share of assets will jump from 7.9% to 10.3% (for an overall gain of 2.4%), and RIAs’ market share will move from 12.2% to 14.4% (for a 2.2% jump). Wirehouses will be the biggest losers, trending down from holding 41.1% of assets to 34.2% (a 6.9% decline), followed by IBDs, ticking down from a 14.1% market share of assets to 12.6% (a 1.5% dip).

Cerulli notes that because of the strong relationships they develop with their plan sponsor clients, dually registered advisers have been successful at attracting the rollover assets of retiring plan participants, except where the defined contribution (DC) provider is a large and well-recognized name brand, such as Fidelity and Vanguard, as these companies have been working assiduously on attracting rollover assets.

To attract this top-performing talent, Cerulli says firms need to offer advisers high levels of support—namely in technology, operations and compliance—as well as flexibility. Integrating new advisers into experienced teams has also proven a successful recruiting tool.