Though Breakaway Plans May Be Paused by the
Pandemic, Brokers Are Drawn to the Benefits and Advantages of Being
an Independent RIA
While brokers have been breaking away from Wall Street for more
than a decade to launch their own registered investment advisor
(RIA) firms, they are increasingly confident in their ability to
make a successful transition and exploring a wider range of paths
to independence, according to the TD Ameritrade Institutional1
Break Away to Independence Spring 2020 Survey.
One in four brokers who indicated they are interested in moving
to the independent RIA channel -- “potential breakaways” -- say
they plan to launch and operate their own firms, the traditional
path to breaking away, compared with 29 percent in the survey TD
Ameritrade Institutional conducted in the fall of 2019. 2
Yet there also is growing interest in joining, not building, an
RIA business. More than a third (36 percent) of brokers are open to
either joining an existing RIA firm as an employee or partnering
with platforms that provide technology and operations support -- up
from a combined 16 percent in the fall survey.
“Though the desire to become an independent RIA remains strong
among brokers, the current environment has prompted more breakaways
to pursue an alternative path to independence -- joining an
established RIA firm,” said Scott Collins, Managing Director of
Sales Consulting at TD Ameritrade Institutional. “For these
advisors, it is an opportunity to gain the benefits of being an RIA
without having to start their own firm.”
TD Ameritrade Institutional in April and May polled 450
professionals in two groups: brokers at national, regional and
independent broker-dealers who indicated they were interested in
moving to the independent RIA channel, to gauge the prevailing
level of interest in “breaking away”; and independent RIAs that
have already made the transition.
Potential breakaways remain highly interested in making the move
to the independent RIA channel -- just not right now, given the
disruption of the COVID-19 pandemic and economic environment. In
the spring survey, 40 percent of potential breakaways say they are
more likely to break away than they were six months earlier.
Brokers in the study also expressed increasing confidence in
their ability to make a successful move, manage an independent
practice and overcome challenges.
Nearly all (99 percent) of the broker respondents say that
clients place their trust in them, the advisor, not the brand of
their employer. Indeed, 80 percent believe they don’t need their
employer’s brand name to grow their own practice. Likewise, 87
percent anticipate they will earn more as an RIA.
Many worries that have kept some brokers in their seats also may
be easing. Nearly eight in 10 expect that managing their own
business won’t be too difficult. Seventy percent of respondents say
they’re not worried about giving up securities licenses or even the
prospect of being sued by their employers when they depart the
firm.
“Our survey reveals that the level of confidence in making the
move to independence has increased among prospects, while some of
the fears that keep brokers in their seats have abated,” said
Collins. “As more brokers successfully make the move and sustain a
migration trend going strong for more than a decade, the
independent RIA has clearly become the place to be.”
To be sure, potential breakaways who said they planned to make a
move in the near term -- in the next 12 months -- fell to 33
percent in the latest survey from 55 percent in the fall.
Yet the motivating factors that have driven breakaway activity
remain. Many brokers remain dissatisfied with the leadership of
their current employers. Potential breakaways desire greater
control over how they manage their practice and the freedom to
serve their clients’ interests first. There is also the opportunity
to earn more. Three out of four potential breakaways believe
they’ll make more as an independent RIA – the equivalent of a 61
percent payout.
And according to the many brokers who have already made the move
to the RIA channel, the grass really is greener: 77 percent of
respondents say their quality of life is better now as an
independent RIA.
Those who have broken away report that making the transition was
less challenging than they’d been led to believe: 80 percent of
RIAs in the survey said their move to independence was easier than
expected while 78 percent said they successfully transitioned all
their clients to their new firms. Likewise, managing compliance and
other operational issues proved to be far less daunting than
expected.
“Advisors often table their own career plans and focus on
clients during difficult times, so it’s little surprise they’re
tapping the brakes on breaking away,” said Collins. “We fully that
expect breakaway activity will pick right back up when the
environment improves, as more brokers will seek out the control,
earnings potential and client-first environment of an independent
RIA.”
To Learn More
To download a summary report from the Spring 2020 Break Away
to Independence Survey, click here.
Advisors that work with TD Ameritrade Institutional also can
access RIAConnect®, a new online platform that can connect RIA
firms with potential M&A opportunities as well as individual
advisors and next generation talent looking to join an advisory
firm.
Brokers that may be considering a move to the RIA channel can
visit the TD Ameritrade Institutional Exploring your IndependenceTM
business evaluator tool, which enables advisors to run their own
numbers to see if making the move to an RIA is the right
choice.
About the Survey
Escalent, an independent research firm, in April and May 2020
surveyed 120 brokers as well as 330 existing independent RIAs on
behalf of TD Ameritrade Institutional. These brokers and investment
advisors were asked to share their views on the industry, their
employers, which factors encouraged them to consider a move to
independence and those that served as deterrents. The margin of
error for this survey is +/- 5.8 percent.
About TD Ameritrade Institutional
TD Ameritrade Institutional is a leading provider of
comprehensive brokerage and custody services to more than 5,000
fee-based, independent registered investment advisors and their
clients. Our advanced technology platform, coupled with personal
support from our dedicated service teams, allows investment
advisors to run their practices more efficiently and effectively
while optimizing time with clients. TD Ameritrade Institutional is
a division of TD Ameritrade, Inc., a brokerage subsidiary of TD
Ameritrade Holding Corporation.
About TD Ameritrade Holding Corporation
Millions of investors and independent registered investment
advisors turn to TD Ameritrade’s (Nasdaq: AMTD) technology,
people and education resources to help make investing and trading
easier. Online or over the phone. In a branch or with an
independent RIA. First-timer or sophisticated trader. Our clients
want to take control, and we help them decide how - bringing Wall
Street to Main Street for more than 40 years. An official sponsor
of the National Football League for the 2016 season, TD Ameritrade
has time and again been recognized as a leader in investment
services. Visit TD Ameritrade's newsroom or amtd.com for more
information.
Brokerage services provided by TD Ameritrade, Inc., member FINRA
/SIPC
TD Ameritrade Institutional and Escalent are separate and
unaffiliated and not responsible for each other’s services and
policies.
1.
TD Ameritrade Institutional is a division
of TD Ameritrade, Inc., a brokerage subsidiary of TD Ameritrade
Holding Corporation.
2.
TD Ameritrade Institutional, Break Away to
Independence Fall 2019 Survey,
https://www.amtd.com/news-and-stories/press-releases/press-release-details/2020/More-Than-Ever-Brokers-Are-Keen-to-Join-the-Independence-Movement-New-Survey-Commissioned-by-TD-Ameritrade-Institutional-Finds/default.aspx
Source: TD Ameritrade Holding Corporation
BI# 1367416
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version on businesswire.com: https://www.businesswire.com/news/home/20200701005235/en/
Joseph Giannone Communications & Public Affairs W: (201)
369-8705 Joseph.Giannone@tdameritrade.com
TD Ameritrade (NASDAQ:AMTD)
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