The number of registered investment advisors plying their trade jumped by an annualized rate of 8% between 2004 and 2012, according to Cerulli Associates. In contrast, the other five advisory channels declined anywhere from 1.2% to 2.5% during that same time period.

Various factors have bolstered the RIA space, says Cerulli, a Boston-based global analytics firm. First and foremost is the “breakaway broker” trend where an advisor or team of advisors at an established practice leave their employee broker-dealer or independent B-D and start their own advisory business.

“While the breakaway broker has been an important driver of change, it is not the sole source of growth for the RIA channel,” says Bing Waldert, director at Cerulli. “Nontraditional competitors, such as law and accounting firms, have entered the advisory industry. The unique challenges of business ownership are no longer an obstacle for a breakaway advisor.”

The investing public has gravitated toward the high-touch service model and unconflicted advice of RIAs. That has hurt the wirehouse model––which is perceived as a product-centric, sales-oriented channel––the most. According to Cerulli, the wirehouse channel declined 2.5% between 2004 and 2012, which was the biggest drop among all of the channels. The average channel declined 1.2% during this time frame, a figure that doesn’t bode well for the growth of the overall industry going forward.

Nonetheless, the RIA channel has expanded from a cottage industry into a vital component of the financial advisory and asset management space, Cerulli says. As part of this maturation, the independent RIA channel is morphing from a coalition of small businesses to one with a growing number of multi-advisor firms that resembles other traditional distribution channels.

To compete in the face of this independence movement, Cerulli notes that many of the largest IBDs are either rolling out options for advisors to affiliate as independent RIAs or are modifying their pricing to match that of custodians.

The latter option presents opportunities to retain their own advisors and to compete for breakaways, which Cerulli explains has led to the continued blurring of lines between traditional distribution channels.