Fewer Advisors Breaking Away, Report Finds

By Cyril Tuohy

Investment advisor representatives, financial advisors or financial advisories who leave or break away from their captive channel to start new in the independent channel is lower than widely reported, a new analysis found.

When only the “successful” advisors and brokers — those who weren’t fired but left on their own accord — are counted, the number drops further still, said Chip Roame, managing partner of Tiburon Strategic Advisors.

The breakaway broker trend may not be as big as everyone says it is, nor is it as significant a movement that some would have others believe, he said.

“I don’t think it’s as simple as there’s some big flood out of the wirehosues and that everyone is going to do well because of that,” said Roame.

Wirehouse advisors number in the tens of thousands and manage trillions of dollars worth of assets.

Speculation that the annual departure of a few hundred successful advisors would turn into a torrent of thousands flooding into the independent channel simply isn't supported by the data, he said.

"I think the majority of people attracted to the job of being a financial advisor are not entrepreneurs," Roame said. "To think they will somehow wake up and say they want to be entrepreneurs, as well as financial advisors, seems based on no facts," he said.

The number of successful advisors leaving their firm for a firm in the same channel or a firm in a different channel came to 645 last year.

“We think that’s where it’s going to stay,” Roame said.

If, say, 800 successful advisors change firms, an uptick due in part to the new fiduciary rule, it would come as little surprise.

But if 3,000 advisors went independent this year that would be a different story, he said.

“We don’t see the reason that thousands of (successful) advisors are going to go independent in the next couple of years,” Roame said.

Forgivable loans made to advisors after the financial crisis to help retain them have recently expired and some market analysts have pointed to that as a reason for advisors jumping ship.

Advisors are often recruited by wirehouses with upfront fees as well, but recent announcements by some wirehouses that they will slow payments to brokers moving between firms might encourage advisors to go independent, Roame said.

For decades, captive advisors looked down on independent advisors but as more advisors have spread their wings, sought independence and become successful, captive advisors could be tempted to follow in those footsteps, he said.

In 2015, there were 413 successful financial advisors or financial advisor teams that changed firms.

About 23,000 individual financial advisors and financial advisor teams joined another firm last year.

Successful advisors or advisor teams last year brought with them, on average, $234 million in assets under management, Tiburon research found.

Collectively, successful financial advisors and financial advisor teams that moved took with them $159 billion in assets last year, the research found.

Churning Within a Channel

With few advisors moving from the captive channel to the independent channel, where are advisors going when headlines announce an advisory firm has departed?

Mostly, they remain in their own channel churning through one wirehouse, broker-dealer, bank or insurance company to another.

Much of the activity is taking place within the independent broker/dealer (IBD) channel, Tiburon found.

In the IBD channel, 8,900 individual advisors or advisor teams left their IBD while 10,300 individual advisors or advisor teams joined an IBD last year.

The vast majority of advisors simply left one IBD for another IBD.

The biggest move in the independent channel last year took place when advisor Vincent Morris moved $4.1 billion in assets under management from independent broker/dealer LPL Financial to independent broker/dealer Triad Advisors.

Earlier this year, GYL Financial Partners moved $4.5 billion in assets from Wells Fargo Advisors Financial network to Focus Financial Partners

“There’s a lot of recent movement of big independent advisors and that’s worth paying attention to,” Roame said.

In the wirehouse channel, 3,583 advisors left a wirehouse last year, but 2,681 advisors joined one, the research found.

In the retail bank channel, 3,302 advisors left a retail bank, but 3,885 joined one last year, Tiburon said.

In the insurance company channel numbers were significantly lower with 1,728 advisors leaving and only 1,417 joining, the research found.

In the regional broker-dealer channel, 1,526 advisors left and 1,287 joined, the research found.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].