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.” But 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 firm.
Georgis noted that Schwab saw a 45% increase in the number of adviser teams transitioning to independence from IBD firms in 2010 compared to 2009. Schwab has seen other models attracting advisers' attention as well (see "Schwab Finds Hybrid Practices Growing in Popularity").
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 independent B/Ds and insurance firms participated in the survey, conducted by Koski Research from January 5-21, 2011.