Schwab Survey Finds Big Majority of IBD Reps Would Go RIA

wirehouses, according to Clark, who prediced that “we’re not done with the movement of accounts, which is very embarrassing” to those wirehouse brokers, who have to explain to their clients why their brokerage statements have yet another new name appearing on the top of their statement.

Moreover, Clark says that “Even the brokers now are starting to talk about the simplicity of fees versus commissions,” with some of that new realization “rooted in distrust” of their parent company. The brokers know that their firms are “making money on products,” he said, but worry that they “may not even know about it.”

When asked  in the survey if they were to choose the RIA model whether they would prefer to join an existing firm or run their own, 58% said they would join an existing RIA firm, and 34% said they would start their own firm (see chart below). “When an individual joins an existing firm,” Clark commented on this finding, “you’re partnering with someone, there’s more more synergistic value.”

Clark wondered in the interview about the appropriateness of the independent BD model. “if I’m entrepreneurial,” he said, referring to a broker considering independence, “why go with an LPL—to a halfway house?” With the improvements in the “technical programs to run their own businesses,” offered by custodians, he said, “maybe you don’t need the interim step any longer.”

Clark suggested that “this movement toward independence” is still in its “early days,” but it represents a “sea change” not just in advisor affiliation models but in how consumers will invest in the future. Those investors, he says, want their brokers to move toward the independent model.

He also warned, however, that we haven’t seen the last of the wirehouses, and thinks it’s possible that one or more wirehouses will “declare that they’re independent” taking a “join us rather than beat us” approach. “I don’t know if they can ever unravel themselves,” Clark concludes, “but the trend is in that direction.”

The survey also found that IBD advisors see a number of benefits to joining or starting an independent RIA firm, including a greater ability to develop and grow their own business (43%), deliver more customized solutions (42%) and hand pick their own team (41%).