This past fall we surveyed a selected group of readers about their business models. We chose readers from across the board, from wirehouses to independent broker/dealers to RIAs to those who described themselves as financial planners, bank brokers and, even, a few employee reps of insurance companies. We wanted to take the pulse of a cross-section of our readership to find out demographic details about them and to identify business trends. For example, we wanted to know who was doing fee-based business, and which was the most profitable model: mostly fees or a mix of fees and commissions (turns out that a mix was more profitable among our respondents). For fee advisors, what do they charge? Do they have account minimums? Which products do they offer?

The sponsor of the study, Cambridge Investment Research, an independent b/d based in Fairfield, Iowa, wanted to know what our readers were looking for in independent b/ds. Oddly (or perhaps not) our survey revealed that reps had something of a love-hate relationship with their employers and b/ds. On the one hand, advisors were most satisfied with online access to client account statements, access to electronic trades and independence. But, they were not happy with payouts and compliance support. (Recruiters take note!)

Here are selected highlights from the survey:

What's an FA?

Two-thirds of our respondents said they work at independent brokerages, regional and national wirehouses (8 percent work for RIAs). Our survey begs the question: Just what is a financial advisor? And half of the respondents described themselves as financial advisors, with other descriptions spread out among financial planner, investment advisor, broker, wealth advisor and so on. Interestingly, 15 percent said they worked for financial-planning shops, but only 13 percent said they acted as financial planners. Further, 18 percent said they earned the CFP designation; but, again, that's less than those who said they worked as financial planners. “Are they hesitant to call themselves CFPs?” asks Philip Palaveev, a consultant with Moss Adams, who reviewed the survey at Registered Rep.'s request. One reason could be that national firms are “cracking down” on reps who call themselves financial planners but aren't dually registered with the SEC as investment advisor reps (who are legally allowed to offer comprehensive financial-planning advice), Palaveev suggests. “Why aren't there more people out there who use the term financial planner?”


Clearly, this is an aging industry, with more than a third of the respondents working in the business for 20 or more years. Respondents from regional and independent b/ds had the highest average length of service, with financial-planning respondents averaging 13.8 years in the business.

Average Fees: Pricing Pressure? What Pricing Pressure

Industry analysts have been predicting pricing pressure for years, but our survey didn't show any, with three-quarters of the respondents saying fees remained the same (a 1 percent fee on average). Of course, it would be interesting to know if they feel they have to do more to earn the same fee.

Revenue Sources: Fees on the Rise

No surprise here: Fee-based business has grown over the last three years, and dramatically, especially among wirehouse reps. Still, the percentage of respondents who said they were primarily fee-based is still only 20 percent of the surveyed population. That's not much, but way up from three years ago. Most respondents seemed to prefer a mix of fees and commissions. “For whatever reason, people are holding onto their commissions,” Palaveev says. That could mean that advisors are still working with smaller clients (respondents average AUM: $66.5 million) or that advisors are holding on to trails from the sale of commission-only products, such as variable annuities or variable life. The most experienced brokers indicated that 61 percent of their revenue was generated from commissions, which is pretty high, although down from three years ago.

The Rep As Money Manager?

Respondents indicated an average of 56 percent of fee business is “self-managed” versus managed by a third party. That's incredibly high, if the respondents mean that they have discretionary control over clients' accounts. More likely, respondents mean that they are following asset-class exposure driven by their own firms' research.

What Reps Want

Broker/dealer recruiters take note: Satisfaction scores are low. Respondents said they weren't happy with technology, weren't happy with the payout structure, with support on compliance issues, with open architecture. Yet, past surveys of Rep. readers have revealed little turnover. “It's probably like marriage,” says Palaveev. “You've been together for a long time and have accumulated a lot of nicks and cuts along the way, but you still love each other.”

Products Offered

Most advisors offer mutual funds, and two-thirds and up offer retirement products, variable annuities and insurance products — no surprise there. And, of course, most sold bonds, too. Interestingly, those categories scored higher than ETFs and separately managed accounts, which if you were listening to management, were the most popular products on earth. The real shocker: 72 percent of the respondents said they offered individual stocks. And a surprisingly large number use options, limited partnerships and hedge funds. Very risky stuff, indeed. “That's a model that would give some compliance departments heartburn,” says Palaveev. B/ds, particularly the wirehouses, have been steering their reps to offer third-party asset managers rather than operating as stock jockeys to limit liability. One possible explanation: FAs may be advising executives on their own company stock options and helping them exercise them for diversification's sake.

How this survey was conducted:

In October 2006, the research unit of Registered Rep.'s parent organization, Prism Business Media, invited, via email, 10,395 readers to participate in an online survey. In, all 3.1 percent, or 323, surveys were completed.

Cambridge Investment Research, an independent broker/dealer, sponsored the survey, but respondents weren't informed of that.