Majority of Independent Broker Dealer Advisors Find RIA Model Appealing, According to New Schwab Survey

Advisors more likely to want to join existing firms and say majority of assets are currently fee-based

Tuesday, March 29, 2011 5:30 am PDT

Dateline:

SAN FRANCISCO

Public Company Information:

NYSE:
SCHW
"We see a growing number of IBD advisors transitioning to the independent RIA model"

SAN FRANCISCO--(BUSINESS WIRE)--In a new Schwab Advisor Services survey of advisors employed at independent broker dealers (IBDs) and insurance companies, more than eight out of ten (86%) say that the idea of being an independent registered investment advisor (RIA) is appealing. Among advisors that know someone who started or joined an RIA firm, an overwhelming 95 percent say they find the RIA model appealing.

“We see a growing number of IBD advisors transitioning to the independent RIA model,” said Nick Georgis, vice president with Schwab Advisor Services, a leading provider of custodial, operational and trading support for more than 6,000 independent RIAs. “In our experience with these advisors, the desire to have more flexibility to develop and grow their own business and the ability to offer more customized solutions to clients are two significant drivers of this trend.”

Georgis noted that Schwab saw a 45 percent increase in the number of advisor teams transitioning to independence from IBD firms in 2010 compared to 2009.

Of the nearly 160 IBD-affiliated advisors surveyed, most consider themselves independent in some way today – 56 percent feel “somewhat” independent and 36 percent say they are “completely independent.” But they recognize differences between their current model and the independent RIA model, with 81 percent of advisors acknowledging that their business would be different if they were to start or join an independent RIA firm.

Advisors at IBDs see a number of benefits to joining or starting an independent RIA firm, including greater ability to develop and grow their own business (43%), deliver more customized solutions (42%) and hand pick their own team (41%) as the top three positives.

The top two macroeconomic changes that would increase the likelihood that an advisor would transition to a fully independent RIA are a friendlier economic and tax environment for small business owners (45%) and an improved overall market and economic environment (43%). Of the advisors surveyed, 58 percent say they would prefer to join an existing firm, while approximately one-third (34%) say they would prefer to start their own firm.

The survey also finds that an average 82 percent of IBD advisors’ assets under management are currently in a fee-based model, and there is a clear trend toward most IBD advisors maintaining a primarily fee-based practice or a mix of commission- and fee-based business. Forty-five percent of advisors surveyed say their long-term plan is to be mostly or all fee-based, while 46 percent indicate they expect to maintain a mix of both commission- and fee-based business. Only eight percent of advisors say their practice will be mostly or all commission-based as their business evolves over time.

The two biggest potential advantages to a fee-based model cited by advisors in the survey are providing an easier to understand pricing model for clients (62%) and having greater predictability in revenue (61%).

About the Survey

One hundred fifty-seven financial advisors employed by independent broker dealers and insurance firms participated in the survey, conducted by Koski Research from January 5 to 21, 2011. All data is self-reported by study participants and is not verified or validated. Koski Research is not affiliated with Charles Schwab & Co., Inc.

About Charles Schwab

The Charles Schwab Corporation (NYSE:SCHW) is a leading provider of financial services, with more than 300 offices and 8.0 million client brokerage accounts, 1.4 million corporate retirement plan participants, 710,000 banking accounts, and $1.6 trillion in client assets as of Feb. 28, 2010. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Advisor Services division. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and mortgage services and products. More information is available at www.schwab.com and www.aboutschwab.com. (0311-2170)

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Contact:

Charles Schwab
Michael Cianfrocca, 415-667-0344
michael.cianfrocca@schwab.com
or
Makovsky + Co.
John McInerney, 212-508-9628
jmcinerney@makovsky.com

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