For the past three years, Dell’Orfano said in an exclusive interview on April 12, he has seen a sizeable uptick in brokers leaving the big broker/dealers (B/Ds) for the registered investment advisor world. He says the independent RIA model “resonates at the consumer level–there’s a lot more awareness” now of the differences between investment advisors and brokers.
Consumers who are aware that investment advisors are fiduciaries and must put their clients’ interests first, as established under the Investment Advisors Act of 1040, can make a choice. Brokers are not required to put client’s interests first, in most cases, and operate under the lower suitability standard. Many brokers want to put clients’ best interests first, and in practice do that, but the fact remains that the regulatory requirements are starkly different for brokers and investment advisors.
Dell’Orfano expects the pattern of broker teams leaving for the RIA world to continue. As he says, the “pipeline is continuing to climb at a pretty rapid rate.” In 2009 these brokers were in “education mode,” and in the first quarter of 2010, they were starting to make their moves.