Data & Research August 11, 2011

Independent Status Leads to More Assets

A recently released study from Pulse Logic set out to explain why independent registered investment advisers (RIAs) have more assets under management than broker/dealer affiliated advisers.  
Reported by

In its Annual Syndicated Study of Retirement Plan Registered Investment Advisers (RIAs), Pulse Logic analyzed differences between broker/dealer affiliated advisers and independent RIAs.

Key findings of the study include:

  • Independent RIAs sell and service larger plans than broker/dealer affiliated advisers. In 2010, new sales for RIAs averaged more than $10 million, while B/D advisers averaged less than $5 million.
  • RIAs have more retirement plans under management. Pulse Logic surveyed 317 independent RIAs, who had an average of more than 25 plans under management, while registered B/Ds averyage between 10 to 15 plans.
  • Pulse Logic found that RIAs remain optimistic and see few threats to their business. When asked what posed a threat, less than 15% felt that new regulations, compliance, the uncertain economic environment posses a significant threat.

Kendall Kay, Director of Pulse Logic, says that the differences between independent RIAs and B/D affiliated RIAs should not be underestimated. The study found that truly independent RIAs have more plans, more assets, and have bigger clients. When asked why this is the case, Kendall says independent RIAs have more time to focus on the qualified plan market. “Even though a lot of the B/D RIAs want to be in the defined contribution retirement plan space, they’ve been struggling to keep up with fee disclosure requirements, confusion over if they’re allowed to give advice to the plan or participants, and other regulatory boundaries,” he told PLANADVISER.

Kendall said another reason independent RIAs have more qualified retirement plan business is because they tend to have more high-net worth clients than B/D affiliated advisers. And those HNW clients are oftentimes small-business owners, who then ask their independent RIA to work with them on their defined contribution plan as well.   

“Any firm venturing into the RIA channel should have a heightened awareness of this market and come prepared in order to avoid costly pitfalls,” the report concluded.   

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