business man and business woman at window of skyscraper (Photo: Shutterstock)

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The registered investment advisor channel is seeinggrowth thanks in part to the movement of advisors from the broker-dealer channel, who are looking for moreautonomy as well as what they see as economic advantages in the RIAmodel.

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According to the latest edition of The Cerulli Edge—U.S. Asset and Wealth Management Edition, Cerulli saysthat 43 percent of those IDBs who prefer the RIA model say thatpayout is higher, while 35 percent cite greater flexibility inmarketing as their reason to consider moving to the RIAchannel.

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Senior analyst Marina Shtyrkov is quoted in the report saying,"The desire for independence is particularly pronounced amongnational and regional B/Ds, many of which may display a strongerentrepreneurial drive compared to their wirehouse peers. Perhapsgiven the advisor-centric cultures at some of the largest nationaland regional B/Ds, these advisors feel more comfortable fullyembracing independence."

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Teaming strategy is used in the RIA model, giving advisors thechance for greater specialization. In addition, the strategyprovides deeper internal intellectual capital, economies of scaleand a broader service set—all of which enhance the clientexperience, says the report, while allowing RIAs to provide moreholistic services

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At present, 62 percent of all RIAs are working within a teamstructure—but among firms with $500 million or more in assets undermanagement, that figure soars to 93 percent.

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There is a but, though, with IBD advisors being concerned aboutassuming greater compliance responsibilities and increasedliability when operating independently. They're also worried aboutthe potential to lose clients while transitioning from one model tothe other—although Cerulli data finds that advisors who recentlyswitched firms typically retain the majority of client assets afterthe move.

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And about their compliance and liability concerns, Shtyrkovcomments, "Strategic partners can help advisors overcome thosefears and explore their options by illustrating how they can helpaddress specific concerns, especially if they can cite examplesfrom their extensive experience navigating other advisors throughthose same issues."

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Advisors also fear that they will lose clients during thetransition.  Despite today's market uncertainty, Cerulliexpects that although it has slowed at present, growth in the RIAchannel will rev up again once things have stabilized. The reportsays, "Breakaway advisors are drawn to the financial upside ofindependence, and potential breakaway advisors favor starting theirown RIA over joining an existing firm, which speaks to the driversof advisor movement to the independent space."

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Marlene Satter

Marlene Y. Satter has worked in and written about the financial industry for decades.