Independent BDs Outpace All Others for Growth

So what does account for it? For starters, according to Cerulli there are four distinct subsegments among IBDs: true, institutional, niche and insurance legacy. According to Louis, the niche, at 14%, and institutional, at 11%, have really pushed the envelope in channel growth for the last five years, with institutional the largest.

The 24 institutional IBDs control 49% of the channel’s advisor force and 59% of the assets, as well as benefiting from national scale, brand reputation and rising advisor counts boosted via recruiting and large acquisition efforts.

Niche IBDs are considerably smaller, according to the report, with the 14 firms controlling just 11% of the channel’s advisors and 14% of assets. But where these firms excel is the benefit of focusing on specific niches or products, such as retirement plans. In addition, says the report, their advisors are the most productive in the channel.

The IBD channel’s pace of growth appeals to asset managers looking for wider distribution opportunities. Louis adds, “IBDs remain one of asset managers’ most consistent opportunities due to the large number of potential firm partnerships, advisors, and accelerating growth from the hybrid channel.”

But if this pace is to continue, IBDs will need to take several actions: evaluate succession planning models, improve advisor productivity and ward off large teams migrating to the independent RIA model.

(Related:  Why Hybrid RIAs Are Enjoying Stellar Growth)