The combined asset market share among independent financial advisory channels is expected to top that of the wirehouses in the next four years, according to Cerulli Associates.
Cerulli’s crystal ball gazing is just the latest in a long line of industry projections highlighting the growing momentum among the independents of the advisory world.
“Multiple factors have contributed to the historical and expected growth of independent channels,” said Kenton Shirk, associate director at Cerulli. “More than two-thirds of advisors indicate they would prefer the independent broker-dealer, registered investment advisor, or dually registered models if they decided to leave their current firms.”
He cited flexibility as one reason for this, along with the greater autonomy relating to portfolio construction, operational flexibility, fee structure, and technology.
“The economics can also be appealing to advisors, as payouts are higher and advisors become responsible for their own overhead decisions,” Shirk said. “Independent advisors can build long-term enterprise value in not only their own solo practice, but also in a broader business entity comprised of multiple advisors, staff, and infrastructure.”
In its Advisor Metrics 2014: Capitalizing on Transitions and Consolidation report, the Boston-based analytics firm said it expects the RIA and dually registered channels to do particularly well in coming years, with their gains in asset marketshare likely coming at the expense of wirehouses and independent broker-dealers.
Among other tidbits in the report:
▪ As a response to retain and attract advisors interested in independence, a growing number of broker-dealers have introduced new platforms to serve RIAs and dually registered advisors regardless of regulatory structure.
▪ Multi-channel B-Ds should target advisors who want an integrated platform with high levels of support and resources, as these advisors are willing to give up some flexibility and cost so they can instead focus on their core responsibilities of nurturing client relationships, managing investments, financial planning, and managing
the business.
▪ Though many advisors consider themselves portfolio managers, Cerulli believes advisors should instead embrace a relationship management model that would allow advisors more time to cultivate relationships, leading to increased retention and business development efforts.