TD Ameritrade Institutional today reported that it has attracted a record 260 breakaway dealers in the first three quarters of fiscal 2011, a nearly 20% rise from the same period last year.
Breakaway brokers are switching over to independent registered investment advisors because they believe potential regulatory changes will likely negatively impact the brokerage industr, TD Ameritrade officials said.
"The fee-based fiduciary business model of independent RIAs is attractive to brokers who want to be proactive and don't want to sit back and wait to see how a rewrite of the fiduciary rules and other pending regulatory changes might impact their livelihoods," said Tom Nally, managing director of sales, TD Ameritrade Institutional.
Because RIAs already operate as fiduciaries, brokers at traditional full-commission firms foresee fewer regulatory challenges and fewer conflicts of interest in adopting the independent RIA model, Nally said.
According to TD Ameritrade Institutional's latest RIA Sentiment Survey, advisors report that 56% of their new assets are coming from traditional full-commission brokerage firms.
The telephone survey, conducted by Maritz Inc., took responses from 501 RIAs from March 21 to April 1.
Respondents said clients are hiring an RIA over a traditional broker because RIAs are required to offer advice that's in the best interest of clients. RIAs also felt they offer more personalized service and a competitive fee structure. They said clients are dissatisfied with the service, advice, performance and fees at full-commission brokerage firms.
"Advisors we talk to are focused on taking control of their futures," Nally said. "They want the freedom to do what's right for their clients, choice and flexibility in investment options and the potential financial benefits associated with becoming an independent advisor."
-Jim McConville