No Sophomore Blues for These Second-Year RIAs

Unsurprisingly, client retention is one of the top areas of focus for advisers who make the move to the independent model.

According to a survey of 40 “sophomore year” independent registered investment advisers (RIAs) who custody with Schwab Advisor Services, the firm found a majority of advisers’ clients stick with them once they make the switch. Not only do clients agree to transition with their advisers as they seek independence, but most are immediately on board when told about the change.

The RIA industry has witnessed an annual growth rate of 8% over the past 10 years, more than doubling industry assets under management, from $1.3 trillion to $2.8 trillion , according to research from Cerulli Associates and Charles Schwab Strategy estimates.

On average, 79% of clients make the jump with advisers when they turn independent, the survey found. The average length of time it takes for advisers to make the decision to turn independent is two years. Self-employment and long-term financial success are the main reasons for going independent. A solid majority (90%) said independence positioned them better for growth. One-hundred percent of those surveyed said they would make the same decision again, and would recommend others do the same.

Most advisers noted “the ability to provide more personalized service to clients” as being a very or somewhat important aspect in the decision to become an RIA, followed by “the preference to work for yourself.” Also important was the need to “protect their personal reputations” by moving to the independent model.


Calling the RIA space one of the fastest-growing segments of financial services, Jon Beatty, senior vice president of sales and relationship management with Schwab Advisor Services, said it is clear that the appetite for independent advice is expanding as more and more advisers turn independent. “With industry growth comes more choice for advisers as they seek out a path to independence,” Beatty said. “Schwab works one-on-one with advisers to determine which solution is best for them, evaluates the economics, and helps develop a transition plan tailored to their needs.”

Schwab also launched the RIA Economic Discovery Tool to provide a hypothetical view of the financial benefits associated with the RIA channel compared with other advisory models.

“We’ve found that the economic decision can often weigh heavily on an adviser considering a transition,” Beatty said. The tool, paired with a conversation with a conversation with a Schwab business development officer, can give a better picture of what the transition might mean to an adviser.

More information about the tool is here, and the survey can be foundhere.