Commission addiction limiting adviser breakaways: Survey

More than half of financial advisers at major financial firms like the idea of becoming RIAs, but many…

More than half of financial advisers at major financial firms like the idea of becoming RIAs, but many worry about maintaining their commission income, with few willing to give it up entirely, according to a survey from The Charles Schwab Corp.

The survey asked 210 non-RIA advisers who manage at least $10 million in client assets for their views on moving to a fee-based business model.

Three out of four said they expect the trend of advisers’ leaving large firms for RIAs to continue.

In fact, half of the respondents said that they find the idea of becoming a registered investment adviser appealing. Advisers under 40 are even more interested, with 65% calling the idea appealing.

But close to 40% of the respondents said that they are uncertain about how they would maintain their commission business.

In fact, if they did make the switch, just 8% said that they would eliminate all commission-based business. More than half (52%) said that they would hold on to at least some commission-based business, and one of five said that they would keep all commission-based business.

The factors that make becoming RIAs appealing to advisers are 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 are 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 past five years, and about a third said that income potential has dipped. But 78% said that the firm’s financial stability has 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.
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