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Independence Appeals to Most FAs , Latest Schwab Study Shows

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A new Charles Schwab survey of advisors at major financial firms finds that nearly six out of ten respondents (59 percent) say the idea of being an independent investment advisor appeals to them, according to Schwab. And close to half of survey respondents indicate that they would actually consider a move to independence.

Some 200 financial advisors participated in the survey, conducted by Koski Research from October 7, 2009, to October 13, 2009. Those surveyed work at about 15 major full-service firms, and 52 percent have more than 10 years of investment advisory experience. The median assets under management is $84 million.

The surveyed advisors are also confident about the strength of their client relationships, with 80 percent saying that they feel their clients are more loyal to them than to their firm.

“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,” explains Barnaby Grist, senior managing director of Schwab Advisor Services, a leading provider of custodial operational and trading support for approximately 6,000 registered investment advisors (RIAs).

As of end of September 2009, 126 teams have moved to an independent model with Schwab, the company says. This is an increase from 123 teams in all of 2008.

Not all advisors who are interested in independence want to start their own businesses from the ground up, as more than half of the advisors surveyed (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,” says Grist. “As a result, independence has become a viable option for a greater number of advisors.”

Familiarity Matters

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. Seventy-seven percent of respondents who say they know someone who is or has considered becoming an independent advisor find the idea appealing.

Nearly half (47 percent) of all respondents know someone who is or has considered becoming an RIA, and just under half (46%) are familiar with the process of starting or joining an RIA. Of the group that is familiar with the process, 69 percent say that they are considering becoming an RIA.

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

“There is still a great deal of education that needs to take place about the process of becoming independent and the resources that exist to help advisors run their businesses,” notes Grist. “Not only has Schwab been providing services independent advisors for more than 20 years, but there is now a thriving industry that has developed to support RIA firms in everything from business planning and compliance to technology support and investment management.”

Shifting Landscape

Advisors find themselves in a dramatically changed landscape shaped by upheavals in the financial services industry, and the survey suggests that these events have had a significant impact on advisors and their clients. Of those participating in this survey:

  • Less than half (46%) believe their employer’s brand helps them acquire or retain clients
  • Over three-quarters (76%) have had to explain why their firm is still a good place to invest
  • Half say that acquiring new clients is harder now than prior to the turmoil in the financial services industry
  • Almost 40 percent say they work for firms that have gone through a merger or acquisition.

Schwab has more than 300 offices and 7.6 million client brokerage accounts, 1.5 million corporate retirement plan participants, 667,000 banking accounts, and $1.36 trillion in client assets, as of September 30, 2009.


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