Skip to main content

You are here


Independence ‘Top of Mind’ for Breakaway Brokers

Industry Trends and Research


For many, the independent registered investment advisor (RIA) channel is as attractive as ever to brokers seeking greater control over their careers and their ability to serve their clients.

According to TD Ameritrade Institutional’s “2019 Breakaway to Independence” survey, 44% of potential breakaway brokers – those at national and regional firms or independent broker-dealers who are considering a move to independence within three years – say they will make their move within the next year.

Developed to understand what motivates these seasoned financial professionals to consider a move, the survey further found that 46% of potential breakaways feel even more strongly about switching to independence than they did at the end of 2018. The firm also cites Discovery Data showing that the independent RIA continues to attract more breakaways than any other in 2018, with a net gain of 3,184 advisors, compared to wirehouses, which had a net loss of 1,247 representatives.

Existing Constraints

Why the increase? In short, the answer continues to center around independence. The primary drivers – more control, more independence and the opportunity to build equity in a sustainable business – are consistent with previously reported findings by TD Ameritrade Institutional. Potential breakaways also reiterate that their biggest sources of dissatisfaction with their current firms are the corporate culture, strategic direction and their firms’ compensation plans.  

“The independent path remains top of mind for brokers,” notes Scott Collins, managing director of institutional consulting for TD Ameritrade Institutional. “It’s not hard to see why: independent RIAs can provide comprehensive, professional advice and they have an alignment of values and interests with their clients.”

Potential breakaways also continue to say that their current firms are more constrained by the regulatory environment and pricing pressures, which impacts the ability of brokers to attract new clients and increase revenue.

Yet, deciding on when to transition can be challenging, regardless of sentiment, according to the report. Surveyed brokers reported holding off on going independent amid heightened market volatility, so they can spend more time with clients and on managing their practice.

The Three ‘Cs’: Control, Compensation and Camaraderie

TD Ameritrade Institutional’s survey further shows that 93% of breakaway brokers believe that the independent channel offers them at least as much income as – if not more than – their current firms. In fact, 36% of these brokers say they would move immediately if they knew their income would be between 5% to 20% more than what they make today. That level jumps to 87% if their compensation would be more than 20% higher in their first year in the independent channel.

But while the potential to have more control and higher income are cited as top reasons for going independent, the majority indicate they do not want to go it alone. Of the potential breakaways, 36% envision themselves acquiring or merging with another business. In addition, a third say they want to join an existing firm.

Fear of the Unknown

Meanwhile, nearly all (99%) of the potential breakaways say their clients choose to work with them individually because of a personal, trusted relationship, and three out of four say they do not need a big national brand to grow their business. Yet, for more than half of the brokers surveyed, the unknowns hold them back from switching to the independent RIA channel.

But according to those who already became independent RIAs, these fears are largely unfounded. The transition to the RIA model was easier than they imagined, according to 80% of those surveyed, and 72% indicated that they transitioned all the clients they wanted to keep.

In addition, nearly 70% of RIAs agreed that breaking free of a national brand was better for their bottom lines and a similar amount said that technology was even better than they had expected.

For some, the Broker Protocol Agreement also is a big factor. When asked how their current firm’s stance on the BPA impact their decision to move, 56% of respondents said that it either has “some impact” or “a significant impact,” while 26% said it has not impact at all, with the remainder said they are not sure.

The findings are based on an online survey conducted by Escalent on behalf of TD Ameritrade Institutional from April to May 2019, among 118 brokers who indicated they planned to go independent within three years, along with 337 advisors who were already at an independent RIA. Broker respondents on average were 50 years old and indicated they were handling close to $95 million in client assets.