Independent Broker-Dealers Are Losing Advisors to the RIA Channel, Cerulli Says
The secular shift of advisor talent away from the large national brokerage firms—often referred to as wirehouses—and toward the independent registered investment advisor channel is a familiar trend in the industry.
In recent years, though, the independent broker-dealer channel has seen the sharpest declines, according to industry researcher Cerulli Associates.
From 2017 through 2022, the number of advisor practices in the independent broker-dealer channel dipped 13%, according to Cerulli, while the number of independent RIA practices increased at the same rate.
By head count, Cerulli reports 50,266 advisors working with IBDs in 2022, down from 62,981 in 2012, a 20% decline. Over the same period the head count of advisors with independent RIAs spiked 66% from 26,775 to 44,419. At the four wirehouses, advisor count dropped from 48,788 in 2012 to 43,907, according to Cerulli, a decline of 10%.
Cerulli’s research found that 32% of IBD advisors say they have considered launching an independent RIA over the past year, citing reasons like a higher payout, increased autonomy, and a “more personable culture.”
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The challenges of starting their own firm weigh heavily on IBD advisors considering a move to full independence, however. Forty-six percent of the advisors Cerulli polled said that the responsibilities of running their own business, ranging from technology to staffing and compliance, are a “major concern,” and 83% said that client retention is at least a moderate concern they have about going independent.
“Departing an employee B-D is a daunting task for advisors who have spent their careers with this type of affiliation,” says Andrew Blake, associate director. “Added accountability and the unfamiliar economics leave many new RIAs feeling spread too thin and unable to grow their practice as they had expected.”
Among advisors thinking about setting up an RIA, there seems to be some uncertainty about what affiliation model to choose. Thirty-six percent of those who had thought about launching an RIA in the past year said they may retain affiliation with their current broker-dealer’s RIA platform but would still consider other options. Another 33% are unsure of their affiliation preference and need more information to figure out which model would best fit their needs. Cerulli’s advice for broker-dealers to retain advisors is to amplify their inherent strengths, such as the scale of the resources they can offer in areas like technology and research, as well as access to lending products and other services that appeal to high-net-worth clients.
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Those features, Cerulli says, “are difficult to replicate at a smaller scale, particularly for most independent RIA and hybrid RIA firms.”
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