Successful Advisors Have Robust Career Choices

Successful financial advisors with a robust book of business can usually write their own ticket; the only question left is where they want to go.

Turns out there are more destinations than ever.

Good advisors can join a wirehouse, a regional broker-dealer, an independent broker-dealer, a discount broker, a financial advisor consolidator, a custodian, an asset manager, become a franchise owner, or simply stick with remaining an employee.

Some of those options – broker-dealers or simply joining a firm as an employee – have been around for many years and involve staying loyal to one captive channel or another.

But other options are starting to crop up, particularly in the independent channel, said consultant Chip Roame.

Advisors could choose to become independent representatives, or join a registered investment advisor (RIA) as a fee-only advisor, or they could launch their own RIA.
Some could even own an RIA firm but work at another RIA, Roame said.

“Advisors with good books of business will have a lot of choices of where to go with their books,” said Roame, managing partner of Tiburon Strategic Advisors.

Another option is to join an RIA consolidator, or super-RIA, or even become an independent branch operator, similar to owning a franchise, he said.

“I could go work in a Schwab branch or I could own my own Schwab branch now,” he said. “They have a program to do that.

“What's interesting now though is to watch some new opportunities emerge."

Asset Growth to Favor Fee-Based Advisors

The future of the financial advisory business points to a splintering of the market as advisors find they have more options across many channels.

Overall, the number of financial advisors across all captive and independent channels is expected to remain at about 300,000 over the next five to 10 years.

Asset growth, however, is expected to rise, particularly among independent advisors.

Independent advisors will see assets rise from $3.8 trillion this year to $4.8 trillion in 2022. Of the 300,000 financial advisors in the U.S. today, about 126,000 are independent advisors.

Much of that asset growth among independent advisors will favor fee-based advisors and advisors dually registered as RIAs and as Series 7 independent representatives, analysts say.

Assets under management (AUM) for fee-based advisors and dually registered advisors are expected to grow at a compound annual rate of about 10 percent, which is double or triple the asset growth among broker-dealers, Tiburon research shows.

Independent advisors have gathered about $3.8 trillion in AUM, of which $2 trillion is managed by RIAs, $1 trillion by dually registered financial advisors and $800 billion by independent representatives.

Reading the tea leaves for coming changes in the industry, Roame said surveys of clients indicate an stunning about face as to the fortunes of broker-dealers.

Less than four years ago, 63 percent of Tiburon clients indicated that independent broker-dealers would experience “huge growth” over the next five years.

This year, the survey of Tiburon clients found that only 3 percent expected independent broker-dealers to report huge growth over the next five years.

Slow to Adapt

Independent broker-dealers and regional broker-dealers have been slower to adapt to the new reality of a fiduciary standard, he said, while wirehouses adapted more quickly and RIAs were already operating to such a standard.

Another reason for the perceived declining fortunes of the broker-dealers is that they serve lower-net-worth clients with simpler financial needs that can be met by online investment algorithms (roboadvisors) and discount brokerage firms, he said.

Clients have “pessimistic views” of wirehouses, independent broker-dealers and regional broker-dealers, but positive views of RIAs and dually registered advisors, Roame added.

For independent broker-dealers, “It’s been a big turnaround for the negative,” he said.

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

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