Advisor Demographics, Compliance Costs May Drive The Next Independent Advisor Boom

Monday, January 23, 2012 08:04
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Advisor Demographics, Compliance Costs May Drive The Next Independent Advisor Boom

Tags: breakaway brokers

As another round of retention bonuses at the wirehouses expire, recruiters are beating their own drums again. But buried in the seasonal hype are a few very interesting observations.

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First, the wirehouses are aging just like every other channel in the financial industry.

 

As Matt Cooper of Beacon Pointe tells Investment News, many advisors are contemplating the last major phase of their careers. 

 

They are not going to be in the business long enough to sign another seven- to nine-year contract and then have time to be their own boss.

 

If they are ever going to break away, it's probably going to be in the next few years.

 

Granted, some will keep drifting from wirehouse to wirehouse and collecting the signing bonus. But for those who put off their dreams of independence, the clock is ticking down.

 

Second, talent is now moving from the independent broker-dealers as well as firms shut down or merge.

 

Ironically, the bigger the firm, the less sustainable its compliance costs are becoming.

 

Keeping high-quality advisors on the straight and narrow is relatively simple, but as the firm grows, the lowest common denominator makes compliance financially "cumbersome" -- in the words of TD Ameritrade CEO Fred Tomczyk -- very quickly.

 

Contrary to the stereotype of the solo RIA eaten alive by compliance, those who free themselves of "the bottom 10%" can operate more efficiently and profitably, Tomczyk tells Investment News.

 

For many, that means "nimble" is once again better than simply bolting on scale. And that means more brokers will be open to solo RIA practice.

 

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