Should I Stay, or Should I Go?
The primary motivation for financial advisors seeking to go independent: the freedom to serve their clients’ best interests.
Schwab Advisor Services released its Supported Independence Study, which polled both advisors contemplating independence and those who had achieved independence during the previous four years about their experiences investigating and pursuing the independent model.
Interviews with advisors from both categories were also conducted as part of the study to gain a better understanding of how they see their careers growing.
Advisors who are planning or have just become independent place a high priority on being able to “shape their own businesses.” Of those who have recently gone independent, 98% stated being able to give more customized service was a major incentive for doing so.
Surprisingly, while a small percentage, 2% of those still exploring independence indicated they aren’t looking for a way to connect their business with their own principles.
“Though the path to independence continues to evolve in new and surprising ways, one thing remains the same: Advisors seek independence because it offers them the freedom to build their business, their way,” said Jon Beatty, COO at Schwab Advisor Services. “They are motivated to offer more comprehensive and product agnostic services – and all with their clients’ best interests at heart.”
Meanwhile, 44% of advisors who are exploring independence stated they are more likely to join or affiliate with an existing RIA than 31% who would start their own firm. In addition, approximately 25% of advisors said they are undecided which course they would choose.
Recent independent advisors were just as likely to start their own RIA business as to join or affiliate with an existing one.
“I wanted to be in control of my own destiny, be able to build a business and practice based on how I wanted to serve clients,” an independent advisor who recently started their own practice told Schwab. “I wanted to have more say over the different tools and technologies. Having more work-life balance was also hugely important.”
The report also showed that 60% of advisors exploring independence are most likely to seek guidance from advisors who have already made the shift, while another 45% plan to consult with other advisors considering independence. Meanwhile, 47% selected advisors who had already gone independent as the most useful source of information.
Advisors who have recently broken away expressed similar sentiments, with 60% stating they sought assistance from those who had already transitioned, and 38% saying these advisors were their best source of information.
Advisors also believe that the transition to independence will benefit their clients overall. Nearly 75% of advisors who have recently gone independent believe they can develop better, longer-term connections with their clients, while 49% of advisors considering a change believe they will be able to do the same if they become an RIA.
Lastly, the survey found that clients agree with their advisor’s vision. A robust 60% of recently independent advisors reported that their clients were immediately on board with their strategy, while 46% of advisors considering a move to independence expect their clients to feel the same way.
Schwab surveyed 200 advisors, 42 of whom became independent in the last four years and 158 who work for a broker-dealer or brokerage business and plan to become independent over the next three years. The surveyors then performed one-on-one interviews with 10 respondents.