On average it's a seven-month process, and many advisors admit that they are winging it

February 1, 2012 — 3:27 PM UTC by Brooke Southall


The water really is fine for advisors who leave a sure paycheck at a wirehouse and jump into the hang-up-a-shingle world of RIAs and independent broker-dealer reps, according to a novel study published today by Fidelity Investments.

Breakaway brokers report generalized satisfaction and a bottom-line improvement and say that the gratification of turning independent is relatively instantaneous. See: Deal killers for almost-breakaway brokers.

Of the 173 advisors interviewed (who moved to an independent model within the last five years and had a minimum of $10 million of assets under administration) for the “Fidelity Insights on Independence Study,” more than three-quarters say they are better off financially.

Of those advisors, 64% report that they felt better off within a mere six months of their move. Ninety-four percent of advisors report that they are happy with their decision to pursue independence. Eighty-six percent of newly independent advisors said that all or most of their clients moved with them. See: Deal killers for almost-breakaway brokers.

Not so frightening

These findings back up what advisors have been reporting anecdotally for years about how breaking away is — in retrospect — not such a frightening endeavor. For a deep reservoir of dozens of breakaway anecdotes, see: Breakaway Stories

The purpose of the study was to get past folklore so that clients can make a decision based on something more solid, according to Mike Durbin, president of Fidelity Institutional Wealth Services. See: Mike Durbin is putting his stamp on Fidelity as an RIA custodian for asset-flush breakaways.

“Now we can say: Here’s the data. It’s much more impactful.”

One reason for the success of breakaways is that they spend considerable amounts of time doing due diligence before making the move.

On average, survey respondents took nearly seven months to go from the initial stage of considering a move to actually initiating the change. See: The transition process is still too rough for gusher of breakaway advisors.

This amount of time invested has stayed relatively consistent despite the increasing efficientcies that Fidelity and others are bringing to the process, according to Durbin.

“I don’t see the timelines being compressed. The time being spent is different.”

Durbin sees advisors spending more time weighing the wide array of choices for independence ranging from total independence as an RIA to joining an existing RIA to becoming a hybrid RIA in one framework or the other.

The road to independence turns out to be even more lonely than previously thought.

Solitary pursuit

Moving to independence is a solitary pursuit. Eight out of 10 respondents made the switch alone, with only 20% moving as a team.

Fewer than half (46%) of “movers” to independence did so with some influence from others — with a recruiter playing a role in one out of five situations.

“We were a little surprised that most people weren’t influenced by an outsider,” Durbin says.

Another surprising factor was that advisors broke away somewhat by the seat of their pants.

Only about half of respondents say they created a written transition plan. Those who created a plan report that the two most common elements of the written plan—account opening and fee model—also proved to be the most helpful benefits for making a smoother transition.

Respondents report that the strategic aspects of their moves—such as defining the vision and mission—were ultimately just as important to their success as tactical factors such as account opening.

Brokers and advisors choosing not to create a formal plan still dedicated significant time to laying the groundwork for the move, including researching options to ensure alignment with their values and interests, according to the research.

Other findings of the survey include:

Survey respondents overwhelmingly have met their goal of more independence (88% indicate they are 100% where they expected to be on this goal).

More than nine out of 10 respondents (92%) say that they are where they expected to be in regard to having access to a better array of investment solutions.

High retention rate

A little more than half of respondents (55%) say that most of the clients that they wanted to keep did, in fact, move with them. An additional 31% say that they were able to keep all of the clients they wanted.

Advisors reported some complications with the transition process: 58% said that it was somewhat or extremely difficult to re-paper their clients’ accounts.

Advisors also wished they had more support, or had planned more, for compliance, technology and marketing.

The study was conducted in collaboration with Cogent Research between Sept. 26 and Oct. 13,

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