Investment advisors flock to independence

A new survey by Charles Schwab shows that three-fourths of advisors believe that the number of advisors becoming registered investment advisors will continue to increase, and more than half say they find the idea of becoming an RIA appealing.

Sixty-five percent of younger advisors, those under age 40, found the idea of becoming independent appealing, compared to 43 percent of those over age 40.

Of those who thought becoming an RIA was appealing, 56 percent said they were interested because it would mean a larger income; 52 percent said it would give them the freedom that comes with running their own business; and 51 percent said it would give them the ability to place a higher priority on client service and communications.

Demonstrating a strong client-centric orientation, 89 percent of those surveyed said they are more committed to serving their clients than serving their firms. While most advisors view the ability to place a higher priority on client needs and to offer a broader set of investment products and services as potential benefits in joining or starting an independent RIA firm, advisors under 40 are even more likely to see these as benefits. Advisors over 40 were more likely than their under 40 peers to feel that clients are more loyal to their advisor than they are to an advisor’s firm, and they were also more likely to think that their clients would follow them if they left to start their own firm.

“The survey results reinforce the client-service orientation of advisors considering independence and the responsibility they feel to meeting their clients’ needs,” said Tim Oden, senior managing director of business development at Schwab Advisor Services. “Also interesting to me is the appeal of the RIA model to advisors under 40 suggesting that the movement to independence isn’t just a flash in the pan, it’s more likely to be a long-term trend.”

Eighty-seven percent of those surveyed said it is more difficult to meet clients’ financial goals today, compared to five years ago, and 53 percent believe it will be more difficult in 2012.

Advisors under 40 feel even more strongly than those over 40 that increased challenges in helping their clients be financially successful include pressures from their current firm’s management to grow book of business, losing assets to other firms and advisors, and too much focus on presenting proprietary-specific products at their current firm. Seventy-nine percent of those who find the idea of becoming an RIA appealing said they are explaining more to their clients about the publicity connected with Wall Street firms.

“The results confirm that advisors seek an environment they feel will give them the freedom to make choices that will most benefit their clients and their businesses,” Oden added. “The growth of the independent model in recent years is attracting more individuals and teams who are exploring if independence could be right for them, whether that means joining an existing firm or starting their own.”

Over 200 financial advisors participated in the survey, conducted by Koski Research from Dec. 3-18, 2011. Those surveyed work at major full-service firms and manage a minimum of $10 million in assets. Sixty-four percent of the advisors in the survey have more than 10 years of investment advisory experience.

The Charles Schwab Corp. provides financial services, with more than 300 offices and 8.6 million client brokerage accounts, 1.5 million corporate retirement plan participants, 787,000 banking accounts, and $1.74 trillion in client assets as of Jan. 31, 2012.


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