As the industry keeps changing, it's important to know a company's "pedigree."
March 2014, Boston. New research from global analytics firm Cerulli Associates finds that traditional broker/dealers are considering a direct model.
"Firms within traditional advisory channels are beginning to consider direct broker/dealers as legitimate competitors and adapting their business models accordingly," states Patrick Newcomb, senior analyst at Cerulli. "There are several benefits to launching a direct platform at a traditional broker/dealer, including creating a funnel for younger advisors that need help prospecting new clients, and to help advisors cultivate younger clients with small account balances."
The first quarter issue of The Cerulli Edge-Managed Accounts Edition analyzes direct providers and eRIAs including the impact of the direct channel on traditional broker/dealers.
"Many traditional firms already maintain a packaged mutual fund advisory (MFA) program," Newcomb explains. "MFAs make up the largest assets within the direct channel, and many broker/dealers have an existing MFA program."
Cerulli warns that firms outside of the direct channel need to tread carefully when entering the direct space. If positioned incorrectly, it could appear that the home office is trying to compete with its advisors, instead of offering them an additional service.