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Advisors Attracted to Independent Model

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In another sign of just how important breakaway brokers are to the major custodial firms, Charles Schwab released on November 20 the results of a new survey of advisors at major financial firms which found that six out of ten respondents (59%) say the idea of being an independent investment advisor appeals to them and nearly half of the respondents indicated they would actually consider a move to independence.

The survey polled 200 financial advisors at 15 major full service firms, including wirehouses, banks, and independent broker/dealers, more than half of whom have more than a decade of investment advisory experience. Some 80% of those advisors said that they felt that their clients are more loyal to them than to the firm for which they work and 54% believe their employer’s brand is not an asset that helps them acquire or retain clients.

“The success of independent investment advisors has not gone unnoticed by the industry at large, and there are now more individuals and teams who are investigating whether the independent model is right for them,” said Barnaby Grist, senior managing director with Schwab Advisor Services, in a statement accompanying the survey release.

Grist also noted that not all advisors who are interested in independence want to start their own businesses from the ground up. This is echoed in the survey findings, as more than half of the advisors participating in the survey (56%) say they would rather join an existing RIA than start their own firm. “Plugging into an existing firm is an increasingly popular choice, and more RIA firms are building business models and technology platforms that allow this to take place,” said Grist. “As a result, independence has become a viable option for a greater number of advisors.”

The survey finds that the more familiar advisors are with the concept of being independent, the more likely they are to consider such a move. In fact, of those respondents who know someone who is or has considered becoming an independent advisor, 77% find the idea appealing.

When considering the perceived challenges to going independent, advisors surveyed cite having back office support (55%), obtaining new clients (39%), and having access to research and information to support investment decisions (30%) as the top three concerns.

Schwab indicated that as of the end of September 2009, 126 teams have moved to an independent model with the firm this year. This is an increase from 123 teams in all of 2008 with a quarter still left to go.

Download a copy of the Schwab advisor survey here.