Advisers seek independence, but less often as entrepreneurs

Going it alone isn’t nearly as attractive for financial advisers as it used to be.
Today, financial advisers are more likely to join an established RIA than to create their own independent advisory firm, a new report by Cerulli Associates found.
About 35% of advisers who are employees of a wirehouse, bank or regional brokerage and are interested in the independent channels said they were inclined to join an existing independent firm as a partial owner or principal of the firm, according to the report. About 30% of advisers said they would create a new firm with other advisers.
Only about 18% of employee advisers said they would start a firm on their own, the same percentage who said they would join an existing independent firm as an employee, the survey found.
“Advisers considering the RIA channel are increasingly looking to join existing firms that can provide them with not only the necessary operational infrastructure but also a sense of community,” said Bing Waldert, director at Cerulli.
(More: The makeup of independent advisory firms has fundamentally changed)
The most recent InvestmentNews/Moss Adams Adviser Compensation and Staffing Study reached a similar conclusion.
EMPLOYEE VS. OWNER
It found that the typical independent adviser today is an employee of a firm working under the direction of its management, as opposed to being an owner of their own practice, according to that report.
“Adviser ownership used to define independence,” the InvestmentNews study said. “Today there are more employee advisers in independent firms than owner-advisers.”
Two crucial factors for the bulk of advisers surveyed by Cerulli is they will have ownership opportunities and won’t have to deal with the challenges of operating their own business because leaders at the helm handle operations.
Cerulli calls these firms, which use the platform of a broker-dealer or custodian, subaggregators. It cites Summit Trail Advisors and Steward Partners Global Advisory as two examples.
(More: A sure-fire approach to get employees to stay)
Cerulli also asked these advisers what major concerns they had about switching to an independent model.
About 54% cited losing clients, 45% said having to deal with more compliance issues, 38% cited having to take on more operational responsibilities and 36% worried about greater technology duties, the Cerulli survey found.
The same report found that on average 72% of clients follow advisers who have moved in the past three years to their new firms.