A new survey of advisors at major financial firms in the United States finds that more than three-quarters of them expect to see a continued shift towards becoming independent registered investment advisors.
The survey from Charles Schwab finds that 76% of advisors expect a continued increase in the number of advisors becoming independent RIAs, and 51% say that they find the idea of being an RIA appealing. Younger advisors show even more proclivity for independence, it notes, with 65% of those surveyed who are under the age of 40 finding the idea of becoming an RIA appealing, compared to 43% of those 40 and over.
The top three benefits cited by advisors who find the idea of becoming an RIA appealing include: the potential for larger income (56%); the freedom that comes with running their own business (52%); and the ability to place a higher priority on client service and communications (51%).
The survey also found that 89% of respondents say that they are more committed to serving their clients than serving their firms. It notes that advisors over 40 were more likely to feel that clients are more loyal to their advisor than they are to an advisor’s firm, and they were also more likely to think that their clients would follow them if they left to start their own firm.
“The survey results reinforce the client-service orientation of advisors considering independence and the responsibility they feel to meeting their clients’ needs,” said Tim Oden, senior managing director of business development at Schwab Advisor Services. “Also interesting to me is the appeal of the RIA model to advisors under 40 suggesting that the movement to independence isn’t just a flash in the pan, it’s more likely to be a long-term trend.”
On questions dealing with current market conditions, the survey found that 87% said it’s more difficult to meet clients’ financial goals today, compared to the past five years. And they don’t expect it to get easier, with 53% predicting that meeting clients’ goals would be more difficult in 2012 than in 2011.
Advisors under 40 feel even more strongly that increased challenges in helping their clients be financially successful include: pressures from their current firm’s management to grow their book; losing assets to other firms and advisors; and too much focus on presenting proprietary-specific products at their current firm.
“The results confirm that advisors seek an environment they feel will give them the freedom to make choices that will most benefit their clients and their businesses,” Oden added. “The growth of the independent model in recent years is attracting more individuals and teams who are exploring if independence could be right for them, whether that means joining an existing firm or starting their own.”
For the survey, over 200 financial advisors participated, from December 3-18, 2011. Those surveyed work at major full-service firms and manage a minimum of US$10 million in assets, 64% have more than 10 years of investment advisory experience. Koski Research carried out the survey.