Advisors don't need a national brand behind them to attract assets, say recruiters and RIAs after new research from Cerulli Associates that shows a strong flow of assets toward independent advisors from the big wirehouses.
"Advisors are more focused on transparency and gaining access to a wider array of the most suitable solutions for their clients, says Ned Van Riper, an advisor recruiter. Clients are working with advisors based on their relationship with the advisor, not the firm behind the advisor."
RIAs are expected to account for a 38% share of assets by 2016, according to the Cerulli research, with wirehouse and independent broker-dealer channels expected to suffer market share losses of 4.5% and 2.7%, respectively.
Dually registered advisors will add 3.3% share of assets by 2016, Cerulli says.
$74 BILLION LEAVES WIREHOUSES
There were outflows of $74 billion from wirehouses in 2012 due to the exodus of so-called breakaway brokers, Cerulli estimates. But despite RIAs' increase in share, wirehouses are expected to retain their lead in total assets, with nearly $6 trillion under management by 2016.
"The wirehouses have such a large lead in assets under management that it will take several more years for any independent channel to overcome," says Van Riper. "However, the trend is clearly favoring the independent, mainly RIA channel."
One reason for RIA expansion is growing consumer awareness of the fiduciary standard, says Lukas Dean, financial planning program director at William Paterson University. Lower fees and expenses and fewer potential conflicts of interest help grow the independent channel too," he says.
Client assets tend to stay with an advisor during a move, Dean adds: "A lot of broker-dealers leave to become an independent RIA once they're established, and their clients tend to follow them."
Carolyn McClanahan, a fee-only financial planner at Life Planning Partners in Jacksonville, Fla., casts advisor movement between channels as a David vs. Goliath fight. With the robo advisor movement and transparency of fees, it will be only a matter of time before major arteries are hit and [the] wirehouses come tumbling down, she says.
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