Breakaway Brokers Migrate to TD Ameritrade

Increase in brokers moving to independence driven by investors: survey

Although there is disagreement in the industry about how prevalent the trend is toward breakaway brokers—those leaving behind wirehouses to seek out independence and perhaps more stability in an uncertain regulatory environment—TD Ameritrade says that its own numbers are up, with a record number coming to TD Ameritrade Institutional in 2011. What’s bringing them? Investor demand, according to the company; clients are looking for objective advice, and brokers are following them.

Chip Roame, head of Tiburon Strategic Advisors, said recently that he didn’t “buy it” that the number of breakaways moving to independence is growing. Rather, said Roame, the majority of the 12% of advisors leaving wirehouses—90%—do so because they are losing their jobs. Of the remaining advisors who move, says Roame, 70% remain in the wirehouse and regional channel.

However many there are, a recent study by TD Ameritrade Institutional showed that those who do go independent are driven by clients who increasingly choose to work with RIAs. In a statement, Tom Nally, managing director, institutional sales, TD Ameritrade Institutional, said, “… the top reason investors choose to work with an RIA is that, as fiduciaries, RIAs are required to offer advice that is in the best interest of their clients. The survey results support what we see as a long-term trend of investors seeking objective advice. Brokers recognize the movement and are following investors to the independent RIA channel.”

Another factor Nally cites in the migration is regulatory change. RIAs operating under the fiduciary standard, he said, may present fewer regulatory and conflict of interest issues to brokers looking for a change.

Brokers may also be drawn by increasingly sophisticated options available to them as RIAs. On Thursday, TD Ameritrade launched an options platform for advisors, the Options Market Center. According to Jeff Chiapetta, who is in charge of the center as well as running TD Ameritrade’s institutional trading and fixed income operations, the center is designed to educate advisors about the use of options, to allow advisors to vet potential options strategies with TD’s options strategy desk, and then to execute those strategies through TD Ameritrade’s trading platform.

Increasing use of options by advisors dovetails with their popularity among sophisticated high-net-worth clients, which could serve as an added attraction for breakaway brokers looking for a new home.

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