Today’s financial services landscape looks far different than it did five years ago, with regulatory shifts, industry consolidation and firms exiting the broker protocol. But movement among advisors still continues, according to new survey results from Fidelity.
Findings from the latest Advisor Movement Study by firm’s Clearing & Custody Solutions unit show that more than half (56%) of advisors considered switching firms in the past five years and nearly one in four (23%) actually made a move during that timeframe. Nearly all of those who switched (92%) are happy with their decisions to do so, according to the study, which explores trends in advisor movement and the feelings of advisors who have switched or are currently switching firms.
Movement to independent channels is also trending upward, Fidelity notes. RIAs and independent broker-dealers are the top destinations, with 64% of movers choosing one of these channels – up from 50% of movers in Fidelity’s 2015 Advisor Movement research.
The study also found that movers are now transferring more assets when they move to a new firm. For example, data for 2017 shows that movers transferred $75 million in median assets, compared to $37.5 million in Fidelity’s 2012 research.
Among the top reasons given by advisors on the benefits of switching:
- 85% felt more confident about their future success;
- 78% cited greater upside in earning opportunity;
- 76% want more control over their future/destiny;
- 75% want the ability to realize their vision for their business;
- 75% want to provide a higher level of client service; and
- 72% cited a better firm culture.
On the other hand, key characteristics cited by the 44% of advisors who have not considered moving in the past five years include high job satisfaction, good work/life balance and the need to market themselves and develop new business if they were to move.
Industry Impact
Uncertainty with respect to the Department of Labor’s fiduciary rule was also on advisors’ minds when they took the survey. Nearly a quarter (24%) of movers alluded to it when describing the market landscape when they considered switching, as did nearly half of advisors (47%) who had seriously considered or are still considering a move.
Peer Pressure
Fidelity’s research further shows that movers’ peers are the most influential people in their decisions to switch firms. The top influencers in their decisions to switch are advisors on their team, former colleagues who moved or advisors who work for the firm. According to the findings, 63% of movers identified these groups as influential to their decision in 2017, versus 50% in 2012.
Movement as a team has also increased. Nearly half of movers (47%) left along with a team in 2017, versus 34% in 2012, the findings show. In addition, advisors moving to an independent broker-dealer more often depart as a team versus other movers, the firm noted.
“Articulating how a firm will support advisor teams during a move is an important piece of the recruitment strategy,” explains Charlie Phelan, Vice President of Practice Management & Consulting for Fidelity Clearing & Custody Solutions. “Fear of the unknown tends to be a significant concern when advisors are thinking about moving, so explaining how firms help support advisors during and after the transition is a critically important aspect of the recruiting process.”
Broker Protocol
Meanwhile, the majority of advisors reported that they were undeterred in their consideration to switch, in light of firms leaving the broker protocol. According to the findings, the majority of advisors who recently switched or are considering switching said the development would have only a moderate or no impact on their decision.
Other findings show that almost half of advisors aware of the news feel that, in the long run, firms that stay in the broker protocol will be more attractive to advisors looking to switch, while more than a third believe that firms that leave the protocol will experience detrimental effects.
Of those affected by departures from the protocol:
- 44% say it would affect their ability to bring clients with them;
- 30% expect a lower recruitment bonus to help offset any legal costs; and
- 38% will vet firms that will help protect them through the transition.
The study was conducted in phases. Phase 1, fielded from Sept. 12–27, 2017, involved quantitative research with 476 advisors who manage or advise upon client assets either individually or as a team, and who work primarily with individual investors. Phase 2, fielded Jan. 29 through Feb 1, 2018, involved qualitative research with 25 financial advisors who had moved in the past five years to an RIA or IBD. The Broker Protocol Study was an online blind survey conducted by an independent firm not affiliated with Fidelity fielded from Dec. 20, 2017 through Jan. 2, 2018, with completions by 455 advisors.
