Financial Firms With Wealth Management Units Beware—Survey Shows Financial Advisors Do Better Going Independent

For financial advisors, transitioning to an independent business model can present challenges. But the rewards might make the change worth it, at least according to a new study from Fidelity Investments.

Of the financial advisors polled, 76 percent reported that they were better off financially after moving to an independent business model. Of that number, 64 percent indicated they were doing better within six months of their move.

“The Fidelity Insights on Independence Study” surveyed 173 advisors who opted for an independent business model, such as an independent broker-dealer or registered investment advisor within the past five years. The advisors polled also had a book of business with a minimum of $10 million in assets under management.

What’s Motivating a Move?

The survey also found that financial advisors are exploring all of their options for their business model, looking at “flexibility to design their practices, choose their products and define their brands,” noted Sanjiv Mirchandani, president, National Financial, Fidelity’s clearing and custody company.

The survey found that 54 percent of the advisors who opted to go independent made the move “without any strong influence from others." Only 20 percent moved as a team, and a full 80 percent of the group made the switch alone. Interestingly, half of the advisors transitioned without a written plan, but they did recommend that others do research and get a specific plan in place before making the move.

Client Retention Post-Move

The advisors were surprised by the number of clients who chose to stay with them post-move. They noted that 39 percent of their clients were “immediately supportive or pleased with their decision,” while “43 percent were initially surprised but ultimately supportive.” Of their clients, only 18 percent were “initially concerned but ultimately supportive.” A more telling finding was that the bulk of clients—86 percent—moved with the newly independent advisor.

Is the Grass Greener?

While 58 percent of the advisors noted that the transition did come with some problems, specifically related to re-papering their clients’ accounts, the move was overall positive. The survey indicated that nine out of 10 reported that they were happy with their decision to go independent, with 45 percent indicating “they knew immediately it was the right move.”