Commission addiction holding back breakaways: Survey

More than half of advisers at major financial firms like the idea of becoming an RIA but many are worried about maintaining their commission income — with few willing to give it up completely, according to a recent Charles Schwab Corp. survey.
It asked 210 non-RIA advisers who managed at least $10 million in client assets for their views on moving to a fee-based business model.
Three out of four expect the trend of advisers leaving large firms for RIAs to continue. In fact, half of the respondents said they find the idea of becoming an RIA appealing. Advisers younger than 40 were even more interested, with 65% calling the idea appealing.
The hitch? Close to 40% of the respondents said they were uncertain about how they would maintain their commission business. In fact, if they did make the switch, only 8% said they would eliminate all commission-based business. Most, around 52%, said they would hold on to at least some commission-based business, and one of out five said they would keep all commission-based business.
The factors that made RIAs appealing to advisers were the potential for more income (56%), freedom to run their own business (52%) and the ability to customize client service (51%). Working against the switch was the time and effort of a transition (61%), less access to legal and compliance support (60%) and the time it would take to run a business (56%).
Of note, 45% said that employee morale at their firm has gotten worse over the last five years, and about a third said income potential had dipped. But 78% said the firm’s financial stability had improved or stayed the same during that time, and 83% saw an improvement or no change in firm reputation.
Overall, interest in the RIA business model continues to be strong, particularly among younger advisers, said Tim Oden, senior managing director of business development at Schwab Advisor Services. “The movement to independence isn’t just a flash in the pan,” he said. “It’s more likely to be a long-term trend.”

(Dan Jamieson contributed to this report.)