Data from Cerulli Associates show clear differences between what channel wirehouse advisers prefer versus where they actually end up after moving firms.
Wirehouse advisers say they would prefer going to an independent broker/dealer (33%) or becoming a dually registered adviser (32%) if they left the wirehouse. However, 44.2% of them go back to another wirehouse when leaving a wirehouse firm. About 23% of them do go to a an independent B/D, but few (3.5%) become dually registered. Other preferred and actual destinations are more in line: 11% prefer a regional channel and 17.2% end up there; about 5% prefer the bank channel and 7% end up there; no one prefers the insurance channel, but about 5% end up there.
According to Cerulli, the major factors contributing to advisers remaining in the wirehouse channel are remuneration, support, and responsibility. For instance, as far as remuneration, advisers might feel tied to a wirehouse through a long-term stock option program. Advisers might also want to stay with a wirehouse for the credibility and stability.
With that said, Cerulli notes that the headlines of 2008 might have degraded the branding of some of these firms, and also made advisers question the stability of the traditional firms. The financial crisis could end up being a catalyst for advisers who want to go independent (see Competition for Advisers Heats Up, RIAs Don’t Regret Going Independent).
“A major obstacle for advisers going independent is the challenges they face when transitioning from being employee to a business owner,” said Scott Smith, senior analyst at Cerulli and co-author of the report, in a Cerulli release. “To minimize this challenge, both independent B/Ds and RIA service agents have set up extensive transition teams specializing in setting up newly independent practices. These teams have noted sharp up ticks in inquiries through 2008 despite turbulent markets.”
Smith also noted that traditional B/Ds are increasingly recognizing the yearning toward independence and are and creating more independent affiliation models to meet the preference of advisers.
The above findings are from Cerulli Quantitative Update: Advisor Metrics 2008.