The road to independence can be financially remunerative more quickly than most advisors might guess, a new survey by Fidelity Investments suggests.
Fidelity said 76 percent of financial advisors who made the switch said they were better off financially; of those, 64 percent said they felt that way within six months of making the move.
Michael Durbin, president of the custodian’s RIA unit, Fidelity Institutional Wealth Services, told Registered Rep. that advisors are keeping a bigger share of their revenue under independence, and they also may pay less for certain expenses.
Last fall the custodian polled 173 advisors with a minimum of $10 million in assets who had moved to an independent business model in the past five years. Those models included joining or starting an independent broker/dealer, joining a registered investment advisor or starting your own RIA, or joining the corporate RIA of a broker/dealer. Fidelity said most of the advisors came from wirehouses but didn’t specify how many; the custodian also didn’t offer the number of advisors who ended up in each of the independent options.
Pure independence—starting your own practice from scratch—still seems to daunt most advisors. Durbin said last year 65 percent of breakaway brokers who custody with Fidelity went with an existing firm, a figure that’s up from 40 percent just three years earlier. “I think there will be some natural limit to the penetration that these existing platforms will have, but I still think there’s headroom even beyond 65 percent,” he said.
Among the other findings in the report:
• 80 percent of those surveyed considered the independent b/d model; 30 percent considered an RIA startup; 23 percent considered an existing RIA; and 21 percent considered working under the corporate RIA of a b/d.
• 55 percent said most of their clients moved with them; another 31 percent said all their clients did.
• 58 percent said it was somewhat or extremely difficult to repaper their clients’ accounts.