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February 02, 2015 at 12:57 PM
There are two different ways to go independent, according to Pete Dorsey, managing director of sales at TD Ameritrade Institutional, each with their own pros and cons: Advisors can start their own firm or join an established independent advisory firm.
“The trend [of breakaway brokers] in the past five years has been exceptionally strong. It’s fueled a lot of our growth,” Dorsey said in an interview at TD’s annual conference on Friday. “As we look out for the next three to four years, retention packages are going to expire at all-time highs between now and 2018. That gives me a lot of confidence that the trend is going to continue, at least for the short- to mid-term.”
The bulk of TD’s business is from advisors hanging their own shingle, he said, but about 25% of new advisors at TD Ameritrade are joining an existing firm. “Five years ago, that didn’t really exist. I think the emergence of that model, the aggregated model or national RIA, whatever you want to call it, is playing a significant role in fueling that breakaway business.”
Dorsey said that according to TD’s last RIA sentiment survey, 53% of advisors’ business is coming from clients leaving wirehouses. “You have this convergence of two different forces; one, the retention packages are expiring at the highest rate they ever have, and you also have the attrition of the end client making the move to independence as well. Put those two forces together and from a breakaway broker standpoint, the future looks pretty bright.”
Dorsey said he’s seeing more Gen X and Gen Y advisors join the business too. “They’re seeing the same numbers we do. They’re going to control $20 trillion by 2020, so in the next five years. It’s a massive opportunity.”
Those younger advisors can be successful advising their peers, he added, who are “starting to accumulate wealth. They need advice and they’re seeking the Gen X and Gen Y advisor to help them with that.”
Part of what Dorsey and his team are trying to do for advisors is to help them figure out “what they’re trying to accomplish and what’s a better fit for them. We have those conversations, ‘What do you do on a day-to-day basis? What do you get paid to do?’ Often times, those two things don’t necessarily line up.”
