Financial advisors who adopt an independent business model are better off financially than those who don't, according to a new Fidelity study.
The "Fidelity Insights on Independence Study" found that more than three-quarters (76 percent) were better off and 64 percent indicated they were better off within six months of their move.
The study is one of the first to explore the transition process itself: researching options, making the move and experiencing independence, as well as its short- and long-term impact on advisors. It surveyed 173 advisors who chose an independent business model, such as an independent broker-dealer or registered investment advisor, within the last five years.
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Half of advisors who moved to independence did so without any strong influence from others or a written plan. On average, they explored two to three different business models before making a move.
"Advisors of all sizes are defining independence on their terms, and reporting financial success as well as personal satisfaction," said Michael R. Durbin, president, Fidelity Institutional Wealth Services. "What's most critical in exploring independence is that advisors understand their options and choose the right fit — whether that's starting an independent advisory firm, joining an independent broker-dealer or creating their own model."
Sanjiv Mirchandani, president of National Financial, Fidelity's clearing and custody company, said, "this study validates what we've been seeing in the marketplace. Advisors seeking independence are interested in the flexibility to design their practices, choose their products and define their brands. And, they're open to exploring a variety of business models."
He added that, "as a leader in both the independent broker-dealer and RIA space, we support more models and, as a result, are able to consult with advisors as they consider their options for independence."
Advisors said their "biggest surprise" regarding their moves was the number of clients who did — or did not — move with them. Advisors reported that 39 percent of their clients were immediately supportive or pleased with their decision; another 43 percent were initially surprised but ultimately supportive; while only 18 percent were initially concerned but ultimately supportive. Nearly nine in 10 (86 percent) of newly independent advisors said that all or most of their clients moved with them.
When asked for their suggestions to other advisors considering a move — in addition to "do research" and "be organized" — they said:
- Know what you want and make sure it's a good fit
- Talk to others who have moved
- Do what's best for clients
The Fidelity Insights on Independence Study was conducted in collaboration with Cogent Research between Sept. 26 and Oct. 13, 2011. Fidelity Investments is one of the world's largest providers of financial services, with assets under administration of $3.4 trillion, including managed assets of $1.5 trillion, as of Dec. 31, 2011.
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