Schwab study explains forces behind advisor moves to independence

Advisors have more options than ever as to how they go independent, according to a new study out from Schwab Advisor Services. Their prime reason for going solo, however, remains the freedom to serve their clients’ best interests.

Schwab Advisor Services released today its Supported Independence Study, which surveyed both advisors considering independence and those who moved to independence within the past four years about their experiences exploring and pursuing the independent model. The study also included individual interviews with advisors in both categories for a deeper perspective on how they see their careers evolving.

According to Schwab’s survey, advisors in both the considering and recently independent groups highly value the ability to “shape their own businesses.” Among those who have recently become independent, 98 percent said having the ability to provide more personalized service was a leading motivator for breaking away. Among those still considering independence, 98 percent said they are seeking the ability to align their business to their personal values, the report said.

“Though the path to independence continues to evolve in new and surprising ways, one thing remains the same: Advisors seek independence because it offers them the freedom to build their business, their way. They are motivated to offer more comprehensive and product agnostic services – and all with their clients’ best interests at heart,” said Jon Beatty, chief operating officer at Schwab Advisor Services in a statement.

Charles Failla, founder of Sovreign Financial Group, believes the Schwab results are “100 percent spot on” based on his conversations with fellow advisors.

“Many people still think going RIA is about getting a higher payout,” said Failla. “Now, to be sure, most advisors that go RIA do, in fact, enjoy a significant bump up in their take home pay. However, what I’m hearing is that while these advisors certainly enjoy capturing more of their payout, they really, really enjoy the added freedom with regard to: compliance, marketing, branding, products, and, solutions”.

Elsewhere in Schwab’s survey, advisors currently considering independence said they are more likely to join or affiliate with an existing RIA (44 percent) than create their own firm (31 percent). Furthermore, the study showed nearly one quarter (24 percent) are unsure of which path they would take.

On the flip side, the report said recently independent advisors were equally as likely to have formed their own RIA firm (50 percent) as they were to have joined/affiliated with an existing RIA (50 percent).

The study also revealed that 60 percent of advisors considering independence are most likely to look to advisors who previously made the transition for advice, while another 45 percent said they would consult with other advisors considering independence. Meanwhile, forty-seven percent cited advisors who have already gone independent as the most helpful source of information, according to the study.

Recently independent advisors feel similarly, the study showed, with 60 percent saying they turned to those who had already transitioned for advice, and 38 percent indicating that these advisors were their best source of information.

Advisors also believe the move to independence is a net good for their clients, the study said. Nearly three-quarters (74 percent) of recently independent advisors say they can build better, longer-term relationships with their clients, and 49 percent of considering advisors believe they will be able to do the same if they become an RIA.

Finally, the survey showed that clients are on board with their advisor’s vision. A healthy 60 percent of recently independent advisors said their clients were immediately aligned with their plan, while 46 percent of considering advisors expect their clients to feel similarly, the report said.

Related Topics: Schwab Advisor Services