Brokers want more control over their business, more money and the freedom to work with clients as they choose, and they are increasingly confident that they can achieve their goals by transitioning to the RIA channel, according to a TD Ameritrade study.
And though the pandemic put a pause on transitions to the RIA model, interest among potential breakaways remains high. One-third of brokers are likely to move in the next 12 months, down from 55% in the fall, according to the study. But one in four brokers indicated that they are more likely to break away than they were six months earlier.
More potential breakaways, the survey found, are open to alternative paths to independence. Thirty-six percent are open to either joining an existing RIA firm as an employee or partnering with platforms that provide technology and operations support. That is up from a combined 16% in the fall. Twenty-five percent, down from 29%t in the fall, said they plan to launch and operate their own firms.
The survey, "Break Away To Independence Spring 2020," was conducted in April and May. It included 120 brokers as well as 330 existing independent RIAs. Respondents were on average 50 years old with 16 to 20 years in the business.
Scott Collins, managing director of sales consulting at TD Ameritrade Institutional, said the current environment has prompted more breakaways to pursue joining an established RIA firm. “For these advisors, it is an opportunity to gain the benefits of being an RIA without having to start their own firm,” he said in a statement.
As for how much they would break away for, 23% said 20% or more, 15% said 15% or more, and 12% said 10% or more would do. More than a quarter (26%) desire 20% or more to move.
Most breakaways are confident that they can achieve their goals as RIAs. More than four in five (87%) believe they will make more money; 80% said they do not need the national brand to grow; 72% are not worried about giving up their securities licenses and 70% are not concerned about being sued by their employer.
Further, nearly all (99%) indicated that their clients are loyal to them, not their company’s brand.
The survey indicated that some fears that kept brokers from independence in the past have abated. “As more brokers successfully make the move and sustain a migration trend going strong for more than a decade, the independent RIA has clearly become the place to be,” Collins said.
Forty-eight percent (compared to 69% in the fall) said the transition to independence seemed difficult; 47% worry that managing legal/compliance issues will be too difficult (compared to 60% in the fall); and 40% said their practice is not large enough to make the move (down from 56%).