Seeking a Brighter Future and More Personalized Client Experience among Driving Forces for Investment Advisors Choosing Independence, Finds New Schwab Institutional Study

Monday, November 10, 2008 6:00 am PST

Dateline:

SAN FRANCISCO

Public Company Information:

NASDAQ:
SCHW

SAN FRANCISCO--(BUSINESS WIRE)--Investment advisors are leaving established financial firms and becoming independent registered investment advisors (RIAs) because they want to work for themselves, deliver more personalized service to clients, and achieve long-term financial success, reports a Schwab Institutional survey of newly independent registered investment advisors. Three-quarters of those surveyed cite a preference to work for themselves and 62 percent cite the desire to provide more personalized client service as very important reasons for starting their own independent fee-based firms. Sixty-two percent of respondents also say the opportunity for greater long-term financial success was a very important reason to go independent. An overwhelming 98 percent say that they would make the decision to go independent again.

While the number of advisors moving to independence has grown steadily for several years, weve seen the trend accelerate in recent months as more advisors face inevitable change at their existing employer and begin to think about what step they want to take next, says Bernie Clark, senior vice president of Schwab Institutional. We heard through this survey and in the conversations we have with advisors every day that the desire for independence is as much about wanting to provide clients with a more personalized experience as it is to secure a brighter future for themselves.

Schwab Institutional is the leading provider of custodial, operational and trading support for independent, fee-based RIAs. The survey was conducted by an independent agency through telephone interviews with 55 advisors who recently started, or went to work for, an independent RIA firm. The advisors surveyed manage approximately $7.2 billion in client assets. Forty-four percent of survey participants previously worked for a full service firm before going independent, but others worked for an independent broker-dealer or a bank and trust institution.

Other key findings include:

  • After the top three listed above, other key motivators for going independent are dissatisfaction with their prior employers business model (60 percent); and the desire to provide a broader set of products and services to clients (53 percent).
  • Eighty-six percent of advisors surveyed say that going independent brought them more income than expected.
  • Nearly half (49 percent) of advisors surveyed say their annual asset growth rate is higher than before they went independent.

I have the ability to be more thorough, to spend more time with my clients and deal with their issues.

Once independent, advisors gain more control over their practice and are able to provide more personalized service, according to 96 percent of those interviewed. Ninety-four percent are more confident in their ability to retain clients. Comments from advisors surveyed anonymously include, I can offer any kind of product that I choose, because you are no longer constrained to sell any products in particular, and We can be much more objective, and that applies to all areas of the business.

We wanted to own our own business, to have more control, and to do it better.

More than half (56 percent) of advisors note that setting up an independent fee-based RIA was more challenging than expected, but 98 percent say they would go through the transition to independence again. Ninety-six percent say they are happier now in their new role; in fact, 75 percent wish they had made the decision to go independent sooner. Seventy-eight percent agree that they now have more control over their personal lives.

After evaluating and choosing technology, obtaining legal and compliance advice, and finding and retaining quality employees round out the top three challenges advisors say they experienced in the first year.

Like all things worth doing, advisors know that the path to independence comes with challenges, but the rewards of business ownership and control are well worth the effort, says John Furey, director of strategic business development for Schwab Institutional. Fortunately, advisors are not on this journey alone; Schwab Institutional provides access to solutions to help them with the various stages of the transition.

Despite the challenges inherent in becoming independent, the survey found that for 80 percent of recently independent advisors, success at winning new clients is better than expected. Another sixty-two percent say that business growth is faster than they anticipated. As one advisor in the survey puts it, Its more lucrative when youre independent. More revenue, more potential income.

So far in 2008, Schwab Institutional has helped more than 60 advisor teams become independent firms. In 2007, 114 teams went independent with the assistance of Schwab Institutional, representing $9.2 billion in assets. Schwab Institutional has more than 50 professionals dedicated to helping advisors transition to independence, including dedicated consultants and service teams. In addition, Schwab Institutional offers an array of start-up services through Business Start-up Solutions, including access to third-party firms who provide assistance with real estate, errors and omissions insurance, company benefits plans, and much more. For more information about Schwab Institutionals services for advisors turning independent, visit www.schwabinstitutional.com/public.

About the Study

The Recently Independent Advisor Study was conducted for Schwab Institutional by independent research firm Koski Research from September 16 through October 3, 2008. Koski Research is not affiliated with Charles Schwab & Co., Inc.

Experiences reflected are not a guarantee of future performance or success and may not be representative of the experiences of other individuals.

About Schwab Institutional

Schwab Institutional is a leading provider of custodial, operational and trading support for independent investment advisors. As of September 30, 2008, client assets custodied with Schwab Institutional stood at $542 billion. These assets, managed by the approximately 5,500 independent advisor firms Schwab Institutional currently serves, represent approximately one-third of total client assets custodied with The Charles Schwab Corporation. Brokerage products offered by Schwab Institutional are not FDIC insured, are not guaranteed deposits, and are subject to investment risk, including the possible loss of principle invested. Schwab Institutional is a division of Charles Schwab & Co., Inc.

About Charles Schwab

The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider of financial services, with more than 300 offices and 7.3 million client brokerage accounts, 1.3 million corporate retirement plan participants, 399,000 banking accounts, and $1.3 trillion in client assets as of September 30, 2008. 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, http://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 Schwab Institutional division. The Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. More information is available at www.schwab.com. (1108-1408)

Contact:

Charles Schwab
Lindsay Tiles, 415-667-3997
lindsay.tiles@schwab.com
or
Makovsky + Co.
Jon Pappas, 212-508-9637
jpappas@makovsky.com

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