The appeal of the independent advisory business model is a magnet for some brokers, and it appears that they're thriving in the independent environment. According to a Fidelity survey, 43% of all RIA firms with at least $25 million of assets under management have been founded or co-founded by breakaway brokers. And they're performing better than other RIA firms-they have more assets under management ($243 million vs. $231 million) and greater total revenues ($1.23 million vs. $1.1 million) even though they've have been operating on average for 11 years, or three years less than other RIAs.
On top of that, the survey found that the 42% average annual growth rate at breakaway-founded firms beat the 36% average at other RIA firms. One reason is because 60% of breakaway-founded firms are focused on actively adding new clients, while a large percentage of other firms (53%) have more established client bases. Breakaway-broker firms are also more likely to have ultra-high-net-worth retail clients-11% of breakaway-broker firms' clients have investable assets of $5 million or more compared to 4% at other RIA firms'.
"The increase in new RIA practices over the past few years has been unprecedented, and we expect that trend to continue, especially given the success shown by breakaways," said Scott Dell'Orfano, executive vice president of Fidelity Institutional Wealth Services. "Our focus is not only to help advisors get started, but also to provide them access to the ongoing technology, products and service they need to thrive and grow their business profitably over the long term."
To do that, Fidelity this week announced that it has expanded its resources for advisors in three key areas. First, Fidelity is offering them access to BenefitProtect, a benefits management group that links independent advisors with healthcare providers. Second, it has negotiated some discounts through The Regus Groups, which provides advisors with access to a network of fully-furnished offices in 400 cities worldwide. Finally, Fidelity has negotiated discounted rates with a new regulatory compliance provider, Advanced Regulatory Compliance. This is in addition to existing third-party relationships with compliances services providers Stark & Stark, ACA Compliance Group, MarketCounsel, and others.