From the October 2009 issue of Investment Advisor • Subscribe!

October 1, 2009

More on Migration

The latest contribution on the migration of brokers arrives in the form of a Cerulli Associates report--Advisor Migration--which estimates that $800 billion will be moving as advisors change firms. Wirehouses will have a net loss of $188 billion in assets, insurance and regional B/Ds will lose a total of $19 billion, while RIAs and dually registered advisors will gain the most assets.

In turn, the RIA custodians are not being passive. TD Ameritrade Institutional president Tom Bradley said in mid-September that his firm has seen a 24% increase in the number of breakaway brokers joining TD in the first six months of 2009, and TD has launched a Web-based Business Evaluator tool developed with ActiFi to help brokers make that decision.

The Schwab Advisor Services executive in charge of its Advisors Turning Independent (ATI) initiative, Barnaby Grist, said that 112 wirehouse teams joined Schwab this year through August, a 40% increase over 2008. In August Schwab released a new white paper for potential breakaways that includes a worksheet that favorably compares the compensation benefits of running an RIA firm versus accepting a forgivable loan from a wirehouse. It concludes that owners of successful RIA firms can earn "69% to 73% net compensation, or owner's income plus profit, less expenses for non-owner professional salaries," and that the "average RIA owner typically earns 60% to 65% net compensation."

However, in an interview, Grist warned against assuming that the wirehouses are at death's door. "Wirehouses are big wounded bears," he said during the mid-September Schwab Impact conference, "and while flailing, they can still do some damage."

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