Over the past 12 years, the Investment and Wealth Institute (IWI) membership has become more independent and advisory-fee oriented, according to a Cerulli report.

The shift away from wirehouses and towards independence accompanies similar changes in the industry as a whole. While IWI advisors, who are often in the upper levels of the industry serving the most wealthy clientele, might have been expected to make this transition more slowly, a Cerulli Associates study fielded in 2018 suggest that is not the case.

In a survey of about 300 members of IWI, which was formerly known as IMCA and has a total membership of about 12,000 advisors, Cerulli found that 45% of IWI members work in an independent firm; 23% work as independent RIAs; 13% in a hybrid firm; and 9% in independent broker-dealers. That's up from 2007, when the IWI reported that less than one-fifth of its 2007 membership were in an independent channel.

IWI’s membership is in some ways not representative of the broad U.S. advisor industry,  according to Cerulli, IWI members are more likely to have high-net-worth clientele. While Cerulli estimates that just under 20% advisors overall concentrate on client with $2 million or more in investible assets, nearly 40% of the IWI’s membership focuses on clients with $2 million in net worth or above.

IWI members, on average, also have higher firm and individual advisor AUM than advisors overall, according to Cerulli.

The Institute’s advisors also skew older than the industry as a whole: 52.1% of its advisors come from the baby boomer generation (ages 52 to 70) and 56.5% of its membership have 20 years or more of experience in the financial industry.

In other words, Cerulli’s IWI study suggests that independent, fee-oriented financial planning is not just embraced by younger advisors with few assets to manage.

As more of the IWI membership becomes independent, according to the report, their dominant service offering is changing: 54.7% are offering comprehensive, ongoing planning and advice, which, based on other surveys, compares to about 47.2% of advisors for the overall advisor industry, according to the report.

A smaller proportion of IWI members and advisors as a whole are offering targeted planning to address clients’ specific needs. Just 22.5% of Institute members and 21.6% of advisors overall are offering targeted planning, according to the report.

Survey respondents said they anticipate greater adoption of comprehensive planning in the future. For example, 55.1% of advisors overall foresee offering comprehensive planning services in the future, and 63.8% of Institute members said the same.

Almost every financial advisor, 93% of Institute members and 93% of advisors overall, offer some sort of retirement income planning  services, according to the report. Most IWI members, 80%, offer investment manager due diligence to their clients. However, much smaller proportions of advisors and IWI members offered other financial services.

For example, 62% of IWI members offer cash management  or budgeting advice, compared to 56% of advisors overall. Similar numbers offered estate planning services. Fewer than three-fifths of institute members are offering generational planning and just 42% offer elder-care planning.

Few advisors of any stripe—1.9% of IWI members, 5.1% of all advisors—are still commission-only, which the survey authors defined as having less than 10% of a firm’s revenue generated by advisory fees. Slightly more IWI advisors, 2.8%, reported using a mix of commissions and advisory fees, with commissions making up more than half of their revenue. Also, 15.4% of advisors overall are still using a blend of more than 50% commissions and less than 50% advisory fees.

Most advisors—and most IWI members—are deriving the majority of their revenue from fees. One-third of IWI members draw between 50% and 90% of their revenue from advisory fees and 41.6% of the overall advisor survey said the same. An even larger proportion of IWI members, 62%, draw between 90% and 100% of their revenue from advisory fees, compared to 37.9% of advisors overall.

At the time of the survey, 17% of IWI member AUM and 27% of overall advisor AUM consisted of brokerage asset. Both groups project that brokerage assets will decline significantly by 2020, the report said.

Both advisors overall and IWI members also predicted significant changes to the mix of investment products employed in client portfolios. While 37.1% of advisors overall are currently using mutual funds, including liquid alternatives, in their portfolios, that proportion is projected to decrease to 28.6% next year.

Advisors predict that they will also become less likely to use variable annuities: 14.2% claimed to be using them at the time of the survey, while 6.5% expect to use them in 2020. The respondents also said that they would use fewer alternative investments in client portfolios moving forward. Fewer advisors also expect to use other insurance products like fixed annuities, long-term care insurance and variable life products, the report said.

Advisors projected  that they would be more likely to use ETFs, individual equities, individual fixed income instruments, money market funds and other cash equivalents, and separate accounts in the future.