An appetite for control, independence and an opportunity to build equity in a sustainable business continue to fuel the migration by wirehouse brokers toward the independent registered investment adviser ranks.
A new report from TD Ameritrade Institutional, which gathered data from current and former brokerage reps, illustrates a generally positive attitude toward the RIA channel and signals a continuation of the migration trend.
The findings from the 2019 Benchmarking and Independence report showed that 44% of brokers surveyed said the likelihood of them leaving the brokerage channel is greater now than it was a year ago, and 46% said the likelihood of them leaving is greater than it was at the end of 2018.
The report cites a net migration of 3,184 brokers joining the RIA ranks in 2018, and validates what most industry watchers and insiders have been hearing for years.
"The survey confirms the anecdotal evidence of my own conversations with wirehouse advisers," said industry recruiter Danny Sarch.
"Virtually everyone at least asks about independence," he said. "Advisers in general are confident that their clients will follow them, and it's proven again and again as they talk to advisers who have made the move to some type of independence."
The report included surveys in April and May with 118 brokers who said they plan to go independent in the next couple of years, and 337 former brokers who are now independent RIAs.
Among the findings from the former brokers is that the fear of going independent often does not match up with reality, according to Scott Collins, managing director of institutional consulting at TD Ameritrade.
"If you look at things that advisers are afraid of when thinking about breaking away, they tend to not be as bad as they had feared," he said.
For example, 69% of former brokers surveyed said the technology is better than they had expected, and 64% said managing their own business is easier than they thought it would be.
More than 90% of independent RIA respondents said they had no issues accessing a broad range of investment products, and nearly 70% said separating from their former employer's national brand improved their bottom line.
"Advisers found that sometimes having to address negative publicity related to a national brand creates challenges and headaches," Mr. Collins said.
David DeVoe, managing director of the investment bank DeVoe & Co., said the report findings "connect critical dots for potential breakaways."
"Your peers who made the move said your fears are unfounded," he added. "You don't need the national brand on your business card, the transition is easier than expected and running your business isn't so hard."
While brokers who are still on the fence might be reluctant to take on the responsibility of running their own businesses, the research shows very little adviser doubt when it comes to client loyalty.
A full 99% of potential breakaway brokers responded that their clients trust them, and 88% of respondents believe they will make more money as an independent RIA.
But for those reps who don't feel completely ready to hang a shingle and go it alone, Mr. Collins said the options are plentiful and brokers are recognizing that.
"The pinnacle of success is owning your own business, and that's one of the primary reasons people make this move," he said. "But it's not like just stepping out to start a business because they have deep relationships with their clients, so they have a built-in business to move."
In terms of alternatives to hanging a shingle, Mr. Collins said breakaways are merging with other firms, joining existing firms, or selling to an aggregator.
"About a third [of potential breakaways] said they would like to join a firm or partner with a firm, and that could come in many forms," he said.
Carolyn Armitage, managing director at the investment bank Echelon Partners, said the fear to go it alone is among the remaining grips that wirehouses have on their reps.
"The fear of change and letting go of the comfortable for the new and strange is usually reserved for the entrepreneurial mindset, which not all wirehouse advisers have," she said. "Breakaways have a tremendous opportunity to partner with an organization that has built the right infrastructure for a plug-and-play quick start or to learn from others who have gone before them and create their own RIA and attract others to join them."