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Industry Spotlight > Broker Dealers

Advisor Group, Cetera and Pershing Tackle 2 Big Advisory Myths

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What You Need to Know

  • Not all advisors at broker-dealers are rushing to become RIAs, says Cetera's Tim Stinson.
  • The IBD channel is not going extinct either, he says.
  • The industry tends to chase the next shiny object too often, Pershing and Advisor Group executives say.

As the advisory landscape continues to evolve, it’s often hard for advisors and brokers to navigate the changes — and some widely held myths don’t help, according to executives from Advisor Group, Cetera Financial Group and BNY Mellon’s Pershing who spoke at the virtual FSI OneVoice conference on Tuesday.

Here are two industry myths that speakers busted during a panel session:

1. There’s a “mass exodus” to the RIA space from the broker-dealer channel.

Moderator Chris Roberts, senior vice president of sales support at Kestra subsidiary Grove Point Financial, pointed to data showing 52% of advisors in the independent broker-dealer (IBD) channel are considering a move to the RIA space.

But Shannon Larson, senior vice president of platform management and product development at Advisor Group, stressed there’s a big difference between “wish to” and actually moving to the RIA channel.

A lot of advisors are concerned about becoming RIAs for reasons that include the “compliance responsibility” they would have to take on and the “greater liability and supervision responsibilities and oversight responsibilities,” she said.

Although “you hear a ton about the RIA space” providing more money, flexibility and autonomy, Tim Stinson, head of wealth management and recruiting sales at Cetera Financial Group, said: “You have to really have an understanding of what that means. Are you prepared to do it? RIAs will tell you how much a pencil costs inside of their” profit and loss (P&L) statement.

Stinson pushed back on claims the IBD space is “going extinct,” saying: “If you look inside of the IBD space … we just don’t have a preponderance of advisors that actually want to run a P&L to that level and to that degree and invest in technology and build brand and autonomy and figure out tech stacks.”

The idea that “there is this mass exodus to RIAs has some hyperbole around it,” Stinson said. “None of us want to be Blockbuster, so we can’t ignore a real-world trend that is out there” about a growing number of advisors and brokers moving to the RIA channel, he said. But he was quick to add: “Are we going extinct? No.”

Despite challenges the IBD channel is facing, “retention is still 90-plus percent across the board for the IBD space,” Stinson noted. IBDs, however, do “have to create new affiliation models and embrace change,” he warned.

The RIA channel is “growing significantly … and it’s the fastest-growing channel within all of retail financial advice,” said Ben Harrison, managing director and co-head of wealth solutions at Pershing. Reasons include investors wanting to be “served by fiduciaries,” but that can be done within the BD channel, he said.

It is the “alignment” between advisors and firm management that is “creating some of this friction” that happens and results in some fleeing to the RIA channel more than the lure of more money, he added.

2. If you build it, they will come (or stay).

Although many people love the classic line “If you build it, he will come” from the movie Field of Dreams, it has warped into “If you build it, they will come.” And many businesses follow the latter concept when they create new platforms and solutions within their businesses, sometimes in the hopes of encouraging advisors to remain at the firm or attracting new advisors.

That can become a “trap” for a business, Roberts warned. In the real world, just because you build it does not mean people will come.

“It’s all about being flexible,” according to Maura Creekmore, managing director and co-head of wealth solutions at Pershing.

“Tech is a really big, important part of that,” Creekmore said, but added: “It’s also understanding that the solution that you thought was going to be the attraction may not be — that it might be something else” and you may need to “bring in other solutions that are more aligned with where you’re heading versus what’s the next shiny object that’s out there.”

Larson agreed, saying “it’s easy to chase those” shiny objects. “As an industry, we get distracted a lot.”

Pictured: Tim Stinson, head of wealth management and recruiting sales at Cetera Financial Group


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