IBD Advisors Seeking Independence: Cerulli

Not only do independent registered investment advisors at wirehouses wish for independence but advisors at independent broker-dealers (IBDs) do as well, according to research.

A new report from Cerulli Associates finds nearly one-third of IBD advisors (32%) have considered opening an RIA in the past 12 months, citing higher payout, the ability to create enterprise value in an independent business, greater autonomy, and a desire to create a more personable culture.

Over the last decade, firms in the independent registered advisor (RIA) channels have grown their headcount at the highest rate, mostly at the expense of wirehouse firms. According to Cerulli Edge – U.S. Advisor Edition, the independent IBD channel is likewise suffering an “exodus to the RIA channels.”

”More than one-third of IBD advisors who considered establishing an RIA in the past year (36%) may retain affiliation with their current B/D’s RIA platform but still would consider other options,” the report noted. “Another 33% are unsure of their RIA affiliation.”

When considering transitioning to an independent or hybrid RIA, 46% are concerned about the increased operational duties that come with running an RIA. Staffing, technology, and compliance are all important considerations for advisors seeking full independence.

“Departing an employee B/D is a daunting task for advisors who have spent their careers with this type of affiliation,” says Andrew Blake, associate director. “Added accountability and the unfamiliar economics leave many new RIAs feeling spread too thin and unable to grow their practice as they had expected.