New RIAs are happier and prospering, says Schwab study

Care in exiting now required as wirehouses crack down on departing brokers

Mar 13, 2018 @ 1:17 pm

By InvestmentNews

Registered representatives who recently jumped ship from a brokerage firm and dived into the RIA registered investment adviser channel are happier and doing better financially than they were at their old firms, a new study from Schwab finds.

According to the "Independent Advisor Sophomore Study," which aimed to understand the motivations, mindset and experiences of brokers who recently became registered investment advisersRIAs, the majority of those polled (93%) said they were happier as an independent, and 70% said they had increased their revenue. The channel-changers also retained an average of 87% of their clients, the study found.

The top three reasons advisers gave for going independent, the survey found, were the freedom to work in the client's best interests (which 94% said was very important), the desire to provide clients with more personalized service (69%) and a preference for self-employment (69%).

The ability to build business value, cited as very important by 66% of respondents, was fourth.

Schwab, the nation's largest RIA custodian, found that planning a transition and moving clients took less than three months for 16% of advisers, three to six months for 31% of advisers and seven to 12 months for 43% of advisers.

At a press gathering in New York City to discuss the study's findings, about the only hint of negativity in the overwhelmingly rosy picture of independence painted by the nation's largest RIA custodian was that brokerage firms are making the departure of big producers more difficult.

"It's now more important than ever for brokers who plan to go independent to understand the choreography of a move and what they can and cannot do," said Tim Oden, senior managing director of business development at Schwab Advisor Services.

He said that Schwab, outside counsel and firms including such as Dynasty Financial Partners, whose president, Shirl Penney, attended the briefing, can provide resources so that departing brokers do not run into trouble.

"I know of a case where a wife sent an email to her husband at a major firm, saying that she stopped by the new office that was under construction and it looked great," said Mr. Penney, who noted that the email set off repercussions by the husband's wirehouse employer.

Fortunately for brokers who leave firms and can't take their clients' the names or contact information of their clients with them, social media has made the communication process with former clients much easier, Mr. Oden said.

Jeff Farrar, who managed and administered just under $8 billion in assets as a broker at UBS, said that under the protocol, the firm allowed him to take the names and contact information of his clients when he left to form Procyon Partners in Shelton, Conn.

"We also put out a tombstone ad on LinkedIn that announced the move," he said, noting that the biggest surprise of the change was his clients' reactions.

"They were far more receptive than we thought they'd be," he said. "Many of them sent us presents.


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