The movement of brokers leaving firms and branching out on their own is alive and kicking – and the industry has itself to blame, according to a new survey from TD Ameritrade's TD Ameritrade Institutional.
According to the survey of 134 brokers who said they plan to go independent over the next three years, more than half of so-called breakaway brokers – or those that are mulling a move from a full-service broker-dealer firm to becoming an independent registered investment advisor, or RIA – are doing so because they are dissatisfied with their employer from a culture, leadership, compensation and career opportunity perspective. Of the survey respondents, just 12% signaled that they are happy with their current employer. On average, the brokers polled oversaw $274 million in client assets and have been with their current firm for 12 years and in the industry for 18 years.
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"There is an undercurrent of discontent as disenchanted brokers navigate the second half of their careers," said Scott Collins, director of brokerage independence at TD Ameritrade Institutional, in a press release announcing the survey results. "Midcareer breakaways have enough tenure to realize that they have options and that the independent RIA path can offer a better way to serve clients and advance their careers."
The survey also found that close to half of those polled expect the brokerage industry to deteriorate at a big rate in the New Year. The brokers pointed to the regulatory environment as the biggest hurdle for the brokerage industry, with changes in compensation and reputation issues also 2018 challenges. For the breakaway brokers, TD Ameritrade Holding Corporation (AMTD) also found that starting their own firm or merging with an existing one are among the preferred methods of leaving a brokerage firm, with independence and flexibility the two key attributes of going it alone. Wanting to make money and have control over day-to-day operations were also cited as reasons to break away, noted the Omaha, Nebraska-based online brokerage.
In more bad news for traditional broker-dealers, the survey also found that the breakaway brokers are confident that they will be able to succeed as independent financial advisors and that 58% plan to move as a team. What's more, 87% said they are confident that, when they do make the leap, their team will go along with them. Of the survey respondents, 71% are certain that their clients will also follow them.
The timing of their push for independence varies, with 55% of survey respondents signaling that they are waiting to see how the Department of Labor's Fiduciary Rule for retirement accounts affects them before making the leap. Meanwhile, 26% said they may become an RIA as a result of the rule. "Becoming an independent RIA can be transformational for financial advisors who want to break out of employee-employer mold and gain control of how they serve clients," said Collins. "They need to do their research and understand all their options, but independence may be the right choice for them and for their clients."