Financial Advisor Survey Reflects Sentiments of Controversial Times Op Ed on Goldman Practices

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A Charles Schwab survey of 200 financial advisors at major firms found that most are disenchanted with how those large firms care for their customers. While they didn't go as far as former Goldman Sachs executive Greg Smith—who complained in a New York Times Op-Ed of attending “derivatives sales meetings where not one single minute [was] spent asking questions about how we can help clients”—there’s evidence supporting what many have said that Goldman isn't the only firm being accused of putting itself before its clients.

Schwab’s survey finds that more than three-fourths (76 percent) of those participating expect a continued increase in the number of advisors becoming independent registered investment advisors (RIAs), with more than half saying they personally find the idea of being an RIA appealing.

Even more interesting: An overwhelming number of experienced advisors responding to the survey (conducted in December 2011) said it’s nearly impossible to meet the needs of customers in a large-firm environment.

“Given the recent market climate, many advisors surveyed say that they are fighting an uphill battle to meet client goals, with 87 percent of those surveyed saying it’s more difficult to meet clients’ financial goals today, compared to the past five years,” Schwab reports.

The survey reflected the views of advisors with major full-service firms who manage a minimum of $10 million in assets. Sixty-four percent of the advisors in the survey had more than 10 years of investment advisory experience. More than half of them said meeting clients’ financial goals would be more difficult in 2012 than in 2011.

Robert Wolfe has seen the trend up close. Wolfe is managing director of United Capital Financial Partners’ South Florida region, and his firm is currently in the process of recruiting individual financial advisors as well as fuller-scale businesses and bringing them under his company’s wing. Wolfe calls his firm “a strategic acquirer of exceptional wealth management practices.” Such “tuck-ins”—also known as aggregators—are helping RIAs grow their businesses.

In an interview with eFinancialCareers, Wolfe said he couldn't speak to the trend nationally, but in South Florida, over the last few months, he has personally talked to over a dozen current wirehouse advisors who were analyzing their options to move to an independent RIA model.

"Almost none of them were deciding if they were going to make the move but rather how they would do so," said Wolfe. "When I asked them what was the most compelling driver for this career change at this time, almost all offered a similar theme: They want to provide objective unbiased and transparent financial advice to their clients free from pressure to push proprietary products."

Schwab is interested in such sentiments because it provides custodian services for nearly 7,000 RIAs. No less than 166 new advisor teams started using its services last year, says Schwab senior managing director of business development, Tim Oden.

Oden declined comment on the Goldman Op-Ed but says he is pleased at the new survey results showing that “The appeal of the independent model is clearly growing in the minds of those we would consider to be prospective clients.”

Schwab pointed to a myriad of reasons more financial advisors of all ages—but particularly those under age 40—are finding the idea of becoming an RIA appealing:

“The top three benefits cited by advisors who find the idea of becoming an RIA appealing include the potential for larger income (56 percent); the freedom that comes with running their own business (52 percent); and the ability to place a higher priority on client service and communications (51 percent),” Schwab stated.

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