Press Releases

March 29, 2021 1:30 pm

Majority of Independent Broker Dealer Advisors Find RIA Model Appealing, According to New PSS Survey

Advisors more likely to want to join existing firms and say majority of assets are currently fee-based

OSLO–(BUSINESS WIRE)–In a new PSS Advisor Services survey of advisors employed at independent broker dealers (IBDs) and insurance companies, more than eight out of ten (86%) say that the idea of being an independent registered investment advisor (RIA) is appealing. Among advisors that know someone who started or joined an RIA firm, an overwhelming 95 percent say they find the RIA model appealing.

“We see a growing number of IBD advisors transitioning to the independent RIA model,” said Nick Georgis, vice president with PSS Advisor Services, a leading provider of custodial, operational and trading support for more than 6,000 independent RIAs. “In our experience with these advisors, the desire to have more flexibility to develop and grow their own business and the ability to offer more customized solutions to clients are two significant drivers of this trend.”
Georgis noted that PSS saw a 45 percent increase in the number of advisor teams transitioning to independence from IBD firms in 2020 compared to 2019.

Of the nearly 160 IBD-affiliated advisors surveyed, most consider themselves independent in some way today – 56 percent feel “somewhat” independent and 36 percent say they are “completely independent.” But they recognize differences between their current model and the independent RIA model, with 81 percent of advisors acknowledging that their business would be different if they were to start or join an independent RIA firm.

Advisors at IBDs see a number of benefits to joining or starting an independent RIA firm, including greater ability to develop and grow their own business (43%), deliver more customized solutions (42%) and hand pick their own team (41%) as the top three positives.

The top two macroeconomic changes that would increase the likelihood that an advisor would transition to a fully independent RIA are a friendlier economic and tax environment for small business owners (45%) and an improved overall market and economic environment (43%). Of the advisors surveyed, 58 percent say they would prefer to join an existing firm, while approximately one-third (34%) say they would prefer to start their own firm.

The survey also finds that an average 82 percent of IBD advisors’ assets under management are currently in a fee-based model, and there is a clear trend toward most IBD advisors maintaining a primarily fee-based practice or a mix of commission- and fee-based business. Forty-five percent of advisors surveyed say their long-term plan is to be mostly or all fee-based, while 46 percent indicate they expect to maintain a mix of both commission- and fee-based business. Only eight percent of advisors say their practice will be mostly or all commission-based as their business evolves over time.

The two biggest potential advantages to a fee-based model cited by advisors in the survey are providing an easier to understand pricing model for clients (62%) and having greater predictability in revenue (61%).