In Practice November 20, 2009

Schwab Finds Half of Advisers Would Consider Independence

When Charles Schwab asked advisers outside the registered investment adviser (RIA) channel whether they’d consider going independent, almost half said yes.

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While only 11% said they are “extremely likely” to consider going to an RIA, 38% said they are somewhat likely, according to the survey commissioned by Charles Schwab. Another 43% are not likely, and 8% are not sure.

Whether they would consider the move, the majority of advisers find going to an RIA “somewhat” or “very” appealing (40% and 19%, respectively). If they went to an RIA, most (56%) surveyed advisers would prefer to join an existing firm, while 27% would prefer to start their own, and 17% don’t know.

Almost half (47%) of the advisers reported having friends or colleagues who have considered becoming an independent RIA. Interestingly, those advisers are more likely to consider becoming an RIA themselves. Almost one in five (19%) of advisers that know someone report being extremely likely to join an RIA, compared to 4% who don’t know someone.

Advisers who are familiar with the process of joining or starting an RIA are also more likely to consider becoming an RIA (69%) than those who are unfamiliar with the process (30%). Overall, 46% of surveyed advisers are familiar with joining or starting an RIA.

Why would advisers want to join an RIA? Most said independence and greater payouts. Specifically, surveyed advisers cited independence (51%), opportunity for a larger income (47%), and opportunity for long-term financial success (44%) as the top reasons to join an RIA.

The greatest perceived challenge of joining an RIA is back-office support (55%), followed by obtaining clients (39%), according to the survey. The majority (80%) of advisers said clients would follow them to an RIA. In fact, less than half (46%) of advisers said their firm’s brand helps them acquire and retain clients.

The overwhelming majority (80%) of surveyed advisers said that since the financial upheaval, they have reassured clients about the financial stability of their firm. More than three-fourths (77%) said they have demonstrated to their clients that their firm has clients’ best interests in mind. More than one-third of advisers said that since the financial upheaval they have helped clients understand the impact of their firm’s merger or acquisition.

Half of the surveyed advisers said client acquisition is harder since the financial crisis (31% said it is “about the same” and 20% reported it is easier).

Data & Research November 20, 2009

Financial Advisers Somewhat Optimistic about Economy

Financial advisers are split over whether the recession has ended, according to the latest Brinker Barometer.

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Slightly more than half (52%) of advisers surveyed by Brinker Capital said they agree with recent reports that the U.S. has emerged from the recession. However, more than half (62%) also said it’s “somewhat likely” the U.S. will encounter a double-dip recession (and 17% said it is “highly likely”).

Whether the recession has actually ended, most surveyed advisers are at least somewhat optimistic about the economy. The majority (63%) believe the U.S. economy at the end of 2010 will show significant improvement over that seen to-date. Half of the advisers are somewhat (43%) or highly (7%) confident in the outlook of the U.S. economy.

When it comes to the performance of the stock market, advisers are even more confident. More than half are somewhat (54%) or highly (5%) confident in the performance of the market. The overwhelming majority (79%) of advisers believe the Dow Jones Industrial Average will end the year above 10,000.

Most (83%) of the advisers agreed that emerging markets present greater growth possibilities than developed markets in the near-term.

While the advisers are somewhat confident on the outlook of the stock market and economy, they are most confident in the outlook of their own practice. Almost three-fourths said they are somewhat (33%) or highly (40%) confident in the outlook of their practice.

Despite the depreciation in their clients’ portfolios, advisers are sticking with their strategies. The overwhelming majority (87%) said they are staying with their asset allocation strategies, while 17% said they are trying to time the market to rebuild client assets, according to the survey.

The Brinker Barometer was conducted online by Brinker Capital in October. The results are based from responses from 247 advisers affiliated with insurance companies, independent broker/dealers, and in sole practice.

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