New Cerulli study sheds light on advisors going independent

Cerulli’s study revealed approximately one-third of IBD advisors (32%) have considered opening an RIA in the past year.

The exodus toward independent channels continues, according to a new Cerulli Edge study. And not just from wirehouses.

Advisor headcount has seen its greatest rate of headcount growth in the past 10 years among firms in the independent registered investment advisor (RIA) channels, primarily at the expense of wirehouse firms. Nevertheless, a new Cerulli Edge report showed the independent broker/dealer (IBD) channel also is losing a significant number of wealth managers to the RIA channels in this zero sum game.

Cerulli’s study revealed approximately one-third of IBD advisors (32%) have considered opening an RIA in the past year. As for the factors fueling their interest in going RIA, the Cerulli study lists a higher payout, the ability to create enterprise value in an independent business, greater autonomy, and a desire to create a more personable culture.

Charles Failla, CEO of Sovereign Financial Group, says the survey’s results are unsurprising because more advisors are seeking higher payouts and greater freedom to serve their clients without being encumbered by the restrictions often imposed by broker dealers.

“In addition to the higher payouts and greater freedoms, there is also a rising demand amongst clients,” said Failla. “Specifically, clients are now, more than ever, demanding unbiased/fiduciary advice. Since the RIA space tends to be more ‘fiduciary friendly’ than the broker dealer space, advisors are clearly skating to where the puck is going.”

Elsewhere, the survey showed more than one-third of IBD advisors who considered establishing an RIA in the past year (36%) may retain affiliation with their current B/D’s RIA platform, but still would consider other options. Meanwhile, an additional 33% said they are “unsure of their RIA affiliation preference and need additional information to understand which model would be the best fit for their practice.”

Finally, when considering the transition to an independent or hybrid RIA, the Cerulli survey said nearly half of advisors (46%) view the greater operational responsibilities associated with running an RIA as a “major concern.” Dealing with factors such as staffing, technology, and compliance can weigh heavily on IBD advisors going solo, the report said.