The ongoing migration of advisor talent from large national brokerage firms, commonly known as wirehouses, to the independent Registered Investment Advisor (RIA) channel continues to shape the industry landscape. This trend has been paralleled by notable declines within the independent broker-dealer (IBD) channel, as reported by industry analysts Cerulli Associates.
From 2017 to 2022, there was a 13% reduction in the number of advisor practices within the IBD channel, while the independent RIA sector saw an equivalent rate of growth. In terms of advisor headcount, Cerulli notes a decline from 62,981 in 2012 to 50,266 in 2022 within IBDs—a 20% decrease. Conversely, the independent RIA sector experienced a 66% increase, from 26,775 advisors in 2012 to 44,419 in 2022. Meanwhile, the four major wirehouses saw a 10% drop in advisor count from 48,788 in 2012 to 43,907 in 2022.
According to Cerulli's findings, 32% of IBD advisors have contemplated establishing their own independent RIA in the past year, driven by the prospects of higher payouts, greater autonomy, and a more personable working environment. However, the challenges of launching and managing a new firm pose significant concerns. Cerulli's survey indicates that 46% of advisors view the operational responsibilities—such as managing technology, staffing, and compliance—as major hurdles, while 83% consider client retention a significant worry when considering independence.
Andrew Blake, associate director at Cerulli, notes, "Leaving an employee broker-dealer is a significant step for advisors accustomed to this type of affiliation. The added responsibilities and unfamiliar business dynamics often leave new RIAs feeling overwhelmed and hinder their ability to expand their practices as anticipated."
The decision to establish an RIA also involves choosing an appropriate affiliation model. Thirty-six percent of advisors considering this path within the last year are inclined to maintain some connection with their current broker-dealer's RIA platform, although they remain open to exploring other avenues. Another 33% remain undecided, indicating a need for further information to determine the best fit for their practice.
Cerulli advises broker-dealers to leverage their inherent advantages—such as technological capabilities, research, and access to lending products and other services attractive to high-net-worth clients—to retain advisors. These benefits, Cerulli suggests, are challenging for smaller independent RIAs and hybrid RIA firms to replicate, providing a competitive edge for larger organizations.
