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Industry Spotlight > Broker Dealers

Time Is Ripe to Go Indie, Brokers Say

By Michael S. Fischer

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Forty-four percent of the brokers at national and regional firms or independent broker-dealers who want to move to the independent RIA channel plan to do so within the next 12 months, according to a survey released Tuesday by TD Ameritrade Institutional.

Prospective breakaway brokers said they wanted more control and independence and the opportunity to build equity in a sustainable business, a finding consistent with previous TD Ameritrade Institutional research.

Brokers attracted by the RIA channel expressed most dissatisfaction with their current firms’ corporate culture, strategic direction and compensation plans.

“The independent path remains top of mind for brokers,” Scott Collins, managing director of institutional consulting for TD Ameritrade Institutional, which serves independent RIAs, said in a statement. “It’s not hard to see why: Independent RIAs can provide comprehensive, professional advice and they have an alignment of values and interests with their clients.”

Potential breakaways also complained that their current firms were more constrained by the regulatory environment and pricing pressures, which affects brokers’ ability to attract new clients and increase revenue.

However, deciding on the right time to transition was a critical consideration for surveyed brokers, regardless of sentiment. Respondents reported postponing the move to independence amid heightened market volatility in order to spend more time with clients and on managing their practice.

Two groups completed an online survey by Escalent in April and May: 118 brokers who said they planned to go independent within two to three years — average age 50, handling some $95 million in client assets; and 337 advisors who were already independent — average age 50, whose firms handled an average of $214 million in client assets.

Breakaways Want More, but Fear the Unknown

Nine in 10 breakaway brokers believed that the independent channel offered them at least as much income as their current firms. Thirty-six percent said they would move immediately if they knew their income would be 5% to 20% more than they make today.

That group would swell to 87% if their compensation was more than 20% higher in their first year in the independent channel.

Although having more control, together with the potential for higher income, were the chief reasons brokers said they wanted to go independent, the majority did not want to do so alone.

Thirty-six percent of potential breakaways saw themselves acquiring or merging with another business on the way to becoming an independent RIA, and 33% said they wanted to join an existing firm.

The survey found that fear of the unknown came into play when brokers mulled a move to independence.

This was the case even though 99% said their clients chose to work with them individually because of a personal, trusted relationship, and three in four claimed that they did not need the support of a big national brand to grow their business.

Those fears are largely unfounded, according to survey respondents who had already become independent RIAs. Eighty percent of these said the transition to the RIA model was easier than they had imagined.

Seventy-two percent reported that they had transitioned all the clients they wanted to keep, and 64% found that running their own business was easier than they had anticipated.

Not only that, 69% of RIAs said leaving a national brand was better for their bottom lines, and a similar percentage said technology was even better than they had expected.

Indeed, 83% of advisors in the survey said their quality of life had improved once they became an independent RIA.

“Those who choose the independent RIA route and enjoy its flexibility and leading-edge technology tell us they should have done it sooner — or that the reward has far outweighed any risk,” Collins, who oversees recruitment of breakaway brokers as new RIA clients, said.

“Advisors say they can’t imagine not being an independent RIA. They relish having full responsibility and authority for their success and being able to run their firms and manage their clients in the way they think is best.”

Michael S. Fischer

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