Breakaway Advisers See Financial Benefits

According to a survey conducted by Cogent Research and sponsored by Fidelity Institutional Wealth Services (Fidelity), 76% of new independent financial advisers claim to be better off financially, and 64% of them were able to make that claim in the first six months of going independent. These numbers are based on a survey of 173 advisers who went independent in the last five years. They were unaware that Fidelity was sponsoring the research.

Eighty-six percent of the advisers claimed that all or most of their clients moved with them. It was reported that thirty-nine percent of their clients were immediately supportive of their decision, forty-three percent were initially surprised but then supportive, and eighteen percent were initially concerned but ultimately became supportive of the decision.

The survey showed that fifty-four percent of the advisers moved without a strong influence from other competing firms offering better deals. Also, eighty percent of them moved alone and twenty percent moved as a team. Michael R. Durbin, president of Fidelity stated, “Advisers of all sizes are defining independence on their terms, and reporting financial success as well as personal satisfaction. What’s most critical in exploring independence is that advisers understand their options and choose the right fit – whether that’s starting an independent advisory firm, joining an independent broker-dealer or creating their own model.”

Also stated in the survey, advisers have reported some problems with the transition process. Fifty-eight percent claimed it was difficult to re-paper their clients accounts. Some advisers also wanted more support for compliance, technology or marketing. Fifty-four percent of the advisers moved without having a plan and believe it is important for others to create a plan first. The survey asked advisers what suggestions they would give to others considering the move and the common answers were:

  • Do research
  • Be organized
  • Know what you want and make sure it’s a good fit
  • Talk to others who have moved
  • Do what’s best for your clients

A majority of the advisers are happy with their decision to move. Ninety-four percent said they were happy to have made the move and ninety percent wished that they had moved earlier. It seems like the numbers match the prediction of more wirehouse advisers breaking away in the coming year, which was previously discussed in our blog, More Wirehouse Brokers Expected to Leave Firms in 2012. Durbin also stated, “We interpret that result as showing that the decision to go independent is personal, private and emotional. A lot did some soul-searching on their own in deciding on a career change.”

Parker MacIntyre provides legal and compliance services to investment advisers, broker-dealers, registered representatives, hedge funds and issuers of securities, among others. Our regulatory practice group assists financial service providers with the complex issues that arise in the course of their businesses, including compliance with federal and state laws and rules.