More Advisers Want to Go It Alone

As the number of independent registered investment advisers (RIAs) continues to rise, a recent study looked into the motives behind why brokerage firm advisers seek to strike out on their own.

In its recent survey, performed this past September, TD Ameritrade Institutional found that, of the 134 brokers responding, nearly half said their interest in breaking away mainly concerns the future state of the broker/dealer (B/D) industry. Forty-six percent believe the brokerage industry is “on the way to significant deterioration.” As to what they consider the industry’s major challenges, 85% pointed to shifting regulations, including the uncertain regulatory environment, as the principal challenge. In addition, 54% cited changing compensation structures, and 46% said damaged public trust and reputation.

Another factor in their decision to stay or go is the Department of Labor (DOL) fiduciary rule, with 55% of respondents waiting to see the full impact of the rule before deciding whether to go independent. On the other side of the spectrum, 26% are considering breaking away to independence sooner, while 14% report the rule has had no impact on their decision.

Other reasons for leaving include the feeling of greater independence in decisionmaking, as 34% cited this authority as a motive. The survey shows that these advisers—or “breakaways”—widely believe independence may lead to more income and better control over their career.

For those on the fence, speaking with an independent RIA who left a firm to practice on his own is a strong motivator, the study reports. Fifty-five percent of respondents have interacted with others who made the move to independence, and 57% of them became more motived to leave upon hearing advice about how to do it.

However, while some seek independence to grow income or gain ownership, others look for the switch to remove them from their current company’s culture. In fact, 55% said their firm’s culture was a strong source of dissatisfaction, and 54% were unhappy with the firm’s leadership/strategic direction. Another 54% were displeased with career opportunities, and 51% were unhappy with the compensation. Only 12% were satisfied with their current employer.