TD Ameritrade Institutional attracted a record 348 breakaway brokers in fiscal 2011, up nearly 20% from fiscal 2010, the company announced today.
Company officials attributed the increase to brokers moving from full-commission firms to TD Ameritrade Institutional, an ongoing trend of investors switching to independent registered investment advisors (RIAs), and brokers concerned about regulatory uncertainty seeking stability at RIA firms.
"As fiduciaries, RIAs are required to offer advice that is in the best interest of their clients," said Tom Nally, managing director, institutional sales, TD Ameritrade Institutional. "The survey results support what we see as a long-term trend of investors seeking objective advice. Brokers recognize the movement and are following investors to the independent RIA channel."
Breakaway brokers are aware of pending regulatory changes -- including a potential rewrite of the fiduciary rule -- that could impact their livelihoods, Nally said. RIAs currently operate under the fiduciary standard and brokers at traditional full-commission firms likely foresee there will be fewer regulatory challenges and fewer conflicts of interest working as an independent advisor, he says.
According to the latest TD Ameritrade Institutional Advisor Index Survey, RIAs continue to grow and take market share from traditional full-commission firms.
The majority of new RIA assets (55%) are coming from traditional full-commission firms.
Nine in 10 RIAs report their total number of clients increased or remained steady over the past six months.
RIAs surveyed show an average revenue growth rate of 18% and added clients at an average rate of 13% over the past six months.
Job satisfaction remains high as 8 in 10 RIAs are satisfied with their careers.
TD Ameritrade's survey was conducted by market research firm Maritz Inc. It queried 502 RIAs in a telephone survey from August 15-26, 2011. RIAs who custody with TD Ameritrade Institutional, as well as other independent RIAs from across the country, were asked to share their views on the economic outlook for their firms and the advisor market in general.
RIAs are happy with their careers, however survey results show RIAs are increasingly negative in their economic outlook, with over 50 percent indicating pessimism, up from 18 percent from the previous quarter. While the direction of the U.S. economy has been unpredictable, TD Ameritrade officials say it now has less impact on brokers' decision to go independent than in the past.
"Just a few years ago brokers were hesitant to go independent amid major market swings and economic uncertainty. They wanted to avoid putting further stress on client relationships during the downturn," said Nally. "Investors are more conditioned today to deal with market fluctuations. Volatility is the new norm, in the eyes of some investors, and has less of an impact on the advisor-client relationship than it did in 2008."
TD Ameritrade officials say breakaway brokers looking for the benefits of independence but want to join or "tuck in" to an established firm represent a growth opportunity for RIAs.
"Advisory firms that have built out their back offices and have excess capacity can bring on breakaway brokers and grow their client base through the tuck-in model," added Nally. "Folding a practice into an existing RIA can provide an advisor the freedom and flexibility without all the responsibilities of running the day-to-day aspects of a business."
-Jim McConville