As the lines between industry segments blur, ,a growing number of independent broker-dealers now think of themselves more as RIAs than commission-based companies.

Perhaps no firm is more emblematic of this trend than Commonwealth Advisors, where Andrew Daniels, managing principal, business development, identifies the IBD more closely with the RIA side of the business.

“I don’t think of Commonwealth as a broker-dealer, I think of it as a national RIA that has a small, accommodative broker-dealer built into it,” said Daniels. “We’re well over 75% of our business being on the advisory side.”

Commonwealth isn’t alone – other traditionally IBD-oriented firms like LPL and Raymond James have reported in recent years that their fee-based business is as large as – or larger than – their other business lines.

Financial Advisor’s 2020 independent broker-dealer feature, which will publish in April’s issue of the magazine, finds that many IBDs are beginning to resemble hybrid RIAs or holding companies for large hybrid RIAs and fee-only RIAs.

Many of Commonwealth’s advisors are choosing to drop their Finra registrations and operate solely in the fee-only space, but remain with the firm for its infrastructure and service model, said Daniels.

But Daniels said that Commonwealth has been focused on growth of its fee-only business for more than a decade.

“Fifteen years ago, Commonwealth was focused on the advisory side of things already,” said Daniels. “This is not a new revelation for us. Our advisors have been moving more and more towards fees, and that becomes a significant internal shift at Commonwealth. What you see today is the logical extension of it – not only are advisors moving to fees, but it’s moving so far onto the advisory side of things that they’re electing to drop Finra registration and step completely away from any brokered transactions where there’s a potential for conflict. That’s just not how they want to engage their clients, they want to engage with a long-term perspective and a nurturing, caring approach.”

Daniels also said that being small in headcount and being privately held have helped Commonwealth adjust to changes in the financial planning industry that have been driven both by regulations like the now-defunct Department of Labor fiduciary rule and the SEC’s Regulation Best Interest, and by a growing consumer preference for non-conflicted financial advice.

Lawrence Roth, managing partner at RLR Strategies and senior advisor at Berkshire Global Advisors, who has himself helmed independent broker-dealers in the past, said that with its focus and growth on the fee side of its business, Commonwealth has successfully “skated to where the puck is going.”

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