Advisors prefer independent firms: survey

By Staff | October 4, 2012 | Last updated on October 4, 2012
3 min read

The majority of U.S. advisors and brokers say the independent business model is most attractive, says a 2011 Broker and Advisor Sentiment Index survey from Fidelity Investments. They claim it offers the most opportunities for advancement and growth.

And among those professionals surveyed, more than half (56%) say working at autonomous firms is preferable in challenging economic environments. Nearly 70% expect they offer more earnings potential than any other business type.

Read: The better business model

Only 18%, on the other hand, say they’re less appealing due to high compliance costs.

Departing advisors are becoming increasingly better at taking assets with them. On average, they bring about 70% of their client assets to their new firm, up from 61% in 2008.

Read: Boutique versus bank battle rages on

While the absolute number of brokers going independent has normalized to pre-2008 levels, Fidelity reports a greater number of large teams making transitions. They’re driven, in many cases, by the growing number of options available, says Scott Dell’Orfano, executive vice president of Fidelity Institutional Wealth Services.

Read: Surviving volatile markets

The independent segment is steadily gaining in popularity overall in terms of headcount and assets. The survey found 17% of brokers have switched firms within the past three years. And more than two-thirds (69%) of those who’d made the jump an existing, independent firm.

The most common reasons advisors move to another firm are:

  • they’re unhappy with changes in the firm’s direction;
  • they want more independence; and,
  • they want a better working environment and more pay.

The survey found 6% percent of brokers and advisors planned to switch firms. Among this group, the vast majority (81%) wanted to leave for existing firms, while the rest planned to start their own practices.

Read: Develop a partner-based business model

The survey also confirmed advisors are aging, with more than half now over the age of 45. The biggest downfall of this trend is many can’t connect with younger clients. This may mean businesses will have to hire younger staff to both prepare for their successions and expand their client bases.

Read: Is Gen Y ready to replace aging advisors?

“While many of their clients are likely beginning to retire, industry data show that brokers and advisors are not too far behind,” says Mirchandani. “This aging of the broker and advisor population not only puts increased focus on M&A and succession planning, but, just as importantly, it raises questions about firms’ strategies for attracting and servicing the next generation of investors.”

This issue was further reinforced in the latest sentiment survey released by Fidelity today. Even though advisors are more optimistic than they have been in prior years, focusing most on growth and new strategies, the challenge of recruiting younger clients is still daunting.

Firms are getting more marketing support to help them appeal to all audiences, and many are considering moving to fee-based models to increase compensation.

Read: An advisor’s guide to online marketing

Additionally, all advisors are planning to incorporate ETFs into their strategies, and younger advisors are adding alternative investment options to appeal to different segments. Women are also increasingly joining the industry, which may boost the number of female clients across firms.

Read: The key to serving female clients staff


The staff of have been covering news for financial advisors since 1998.