Break Away To Independence Spring 2020 Survey - TD ...
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TD Ameritrade Institutional
Break Away To Independence
Spring 2020 Survey
July 2020
TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark
jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2020 TD Ameritrade.About the Survey
§ TD Ameritrade Institutional set out to understand what motivates financial professionals at full-service broker-dealers
and independent broker-dealers to consider a move to the independent RIA channel.
§ From April to May 2020, 120 brokers who indicated they planned to go independent within two to three years -- referred
to as ”potential breakaways” -- completed an online survey conducted by Escalent, on behalf of TD Ameritrade
Institutional. Broker respondents were, on average, 50 years old and indicated they were handling roughly $100 million
in client assets. Respondents averaged 20 years of experience, including 11 years with their current employer.
§ In addition, we surveyed 330 advisors who are already at an independent RIA. This group was, on average, 50 years
old and managed $320 million in client assets. These respondents, on average, worked as financial advisors for 16
years and were with their current firm for 13 years.
§ The margin of error for this survey is +/- 5.8%.
§ This Spring 2020 Survey follows up on a similar survey conducted by Escalent, on behalf of TD Ameritrade Institutional,
in Fall 2019 (referred herein as “the fall survey”)
TD Ameritrade Institutional and Escalent are separate and unaffiliated and not responsible for each other’s
services and policies.
2Executive summary More potential breakaways explore joining an RIA, versus launching a new firm § More brokers are open to joining an existing RIA firm (19% vs. 9% in Fall 2019) § More brokers, 17%, would partner with a firm that provides technology vs. 7% six months ago. § 25% want to launch their own firm, compared with 29% in the fall. Potential breakaways are more confident, less worried about a move to RIA § Fewer brokers worry that the transition will be too difficult (48% vs. 69% in the Fall) § Fewer brokers, 47%, express concerns about legal/compliance issues vs. 60% in the Fall. § Potential breakaways are confident they have the support of all their clients. RIAs continue to endorse making the move to independence. § 77% of RIAs say their quality of life is better § 80% say the transition was easier than expected. § 78% transitioned all the clients they wanted after becoming an RIA. § 73% say removing their employer’s national brand helped the bottom line § 72% say RIA technology is better than expected § 66% say managing their own business is easier than they thought. 3
Executive summary
Brokers continue to believe in the benefits of RIA independence.
§ Greater control remains the primary driver for brokers considering a move to the RIA channel.
§ 3 in 4 believe they’ll earn more as independent RIAs.
COVID-19 and market volatility added to the challenges that brokerages face.
§ Around 1 in 3 prospective breakaways cite the COVID-19 pandemic and financial market turbulence as key challenges
§ Concerns about regulations, pricing pressure and attracting new clients remain top-of-mind.
Not surprisingly, flights to independence were delayed – but not cancelled.
§ 33% of prospective breakaways are likely to move in the next 12 months, down from 55% in the Fall 2019 survey.
§ Still, 40% say they are more likely to break away than they were 6 months earlier
4Brokers: Current
sentiment
5Brokers’ interest in the independent RIA model
remains high
Brokers’ likelihood of breaking away, compared with 6 months ago
Less likely About the same More likely
15% 46% 40%
6
Q6B. How does your likelihood to break away compare to 6 months ago? Are you...? (Base: Potential Breakaways; n=120)More brokers are open to alternative paths to
independence
What is your ideal path to becoming an Independent RIA?
Acquire or merge with another business 39% vs. 48% in Fall 2019
Start my own business 25% vs. 29% in Fall 2019
Join an existing firm as an employee 19% vs. 9% in Fall 2019 Combined
36%
Partner with a company that provides technology (vs. 16% in
17% vs. 7% in Fall 2019
and other support Fall 2019)
7
BSM9. Which of the following is your ideal transition path to the Independent RIA channel? (Base: Potential Breakaways likely to move to the RIA channel; n=53)Breakaways are confident they can succeed
as RIAs
Perceptions about the independent RIA path are positive
Potential Breakaways Who Agree
I will make more money as an independent advisor 87%
I will be able to grow without a big national brand name 80%
Managing my own business won’t be too difficult 79%
I don’t worry that I will have to give up my securities licenses 72%
I don’t worry that my employer will sue me if I leave 70%
I don’t worry that I will have to give up my commissions-based income 59%
8
BSM1A. Which of the following is closer to your views? (Base: Potential Breakaways; n=120)
BSM11. For each of the following statements on making a move to independence, please indicate whether you agree or disagree? (Base: Potential Breakaways; n=120)Brokers are confident clients are loyal to them
as individuals.
Potential breakaways: My clients trust me
My clients trust my
company's brand
My clients trust me
personally
99%
9
BSM1A. Which of the following is closer to your views? (Base: Potential Breakaways; n=120)Meanwhile, many worries that hold back brokers
have eased
Why Potential Breakaways Delay Independence
Potential Breakaways Who Agree
Spring ‘20 Fall ‘19
I put my own plans on hold during periods of heightened
51% 55%
market volatility or a market downturn
The transition to independence seems to be too difficult 48% 69%
Managing legal/compliance issues will be too difficult 47% 60%
My practice isn’t large enough to become an RIA 40% 56%
10
BSM11. For each of the following statements on making a move to independence, please indicate whether you agree or disagree? (Base: Potential Breakaways; n=120)Brokers: Priorities and
concerns
11Brokers want greater control and potential
to earn more
Top Reasons To Go Independent
Higher compensation 36%
More control over my business 35%
Freedom to work with clients how I want 14%
Freedom to select investments that are best for my 10%
clients
Better quality of life 5%
12
BSM6C. Which is the #1 reason causing you to move to the Independent/RIA channel? (Base: Potential Breakaways; n=120)Brokers expect they can earn more as RIAs
Expected RIA Compensation vs. Their Payout at Current Firm
Worse About the same Better
4% 22% 74%
13
BSM8B. Compared to your current employer, is the “payout” in the RIA channel…..? (Base: Potential Breakaways to RIA; n=53)Brokers expect they can earn more as RIAs
Compensation in the RIA Channel as a Percentage Payout
1% to 20% 21% to 40% 41% to 60% 61% to 80% 81% to 100% 100% or more
1% 7% 22% 22% 46% 2%
70%
14
BSM8A. Thinking about what you’ve heard about compensation in the Independent/RIA channel, please complete this sentence: Com pensation in the RIA channel is generally equivalent to a “payout” of XXX% (Base: Potential Breakaways likely
to move to the RIA channel; n=53)Many brokers would break away for a 15% increase
To move to independence now, my income would need to be…
My reason to break 15% more 10% more 5% more
More than 20% 20% more
away is not financial
23% 26% 23% 15% 12% 1%
50%
(vs. 53% in Fall ‘19)
15
BSM7A. If you could be assured a certain level of income in your first year in the Independent/RIA channel, how much additional income would you need to make the move now? (Base: Potential Breakaways; n=120)Breakaways are more committed to long-term goals
than short-term gains.
Potential breakaways say they’re focused on the long run
28%
Maximizing your current payout over
the next 3-5 years
Building long-term wealth and a
sustainable business
72%
16
BSM7B. Which of the following is more important to you? (Base: Potential Breakaways; n=120)Brokers give their employers mixed reviews.
Biggest Dissatisfactions With Current Firm
Somewhat
Not satisfied Satisfied
satisfied
Compensation 29% 30% 41%
Leadership/strategic direction 34% 26% 39%
Corporate culture 28% 38% 35%
17
↑/↓ indicate significant difference versus Fall 2019 at 95% confidence level
BSM1. How satisfied are you with each of the following aspects at your current firm? (Base: Potential Breakaways; n=120)Regulation, pricing are stumbling blocks
for brokerages
Top Challenges Facing Their Employer Top Challenges Facing Their Practice
Regulatory environment 55% Attracting new clients/increasing revenue 56%
Pricing pressure 40% Aging clients could lead to withdrawals and net outflows 37%
Financial market outlook 35% Coronavirus pandemic 35%
Coronavirus pandemic [COVID-19] 32% Changing corporate culture 23%
Public trust in financial firms like ours 29% Public trust in financial firms like ours 22%
Aging client base 28% Changing compensation structure 21%
Consolidation/M&A activity 20% 18%
Our firm's technology is obsolete
Increasing demand for fee based pricing 19% 9%
Increasing demand for fee based pricing
The Broker Protocol 14% More investors seek a fiduciary advisor relationship 7%
Financial health of my employer 12% New disruptive technology 1%
Other challenges 7% Other challenges 3%
18
BSM2. In your opinion, what are some of the most important challenges facing your employer? (Base: Potential Breakaways; n=120)
BSM3. In your opinion, what are some of the most important challenges facing your practice? (Base: Potential Breakaways; n=120)Brokers: Breakaway
plans on hold
19As in past periods of turbulence, breakaway plans
are on hold
Likelihood of moving to a new firm in the next 12 months
Less likely About the same More likely
30% 38% 33%
vs. 55% in Fall ‘19
20
Q6A. How likely are you to move to a new firm in the next 12 months? (Base: Potential Breakaways; n=120)Uncertainty spawned by COVID-19 and financial
market turmoil joins top broker challenges.
Top Challenges Facing Current Firm Top Challenges Facing Practice
Spring ‘20 Fall ‘19 Spring ‘20 Fall ‘19
Regulatory environment Attracting new clients/increasing
55% 72% 56% 66%
revenue
Pricing pressure Aging clients could lead to
40% 56% 37% 55%
withdrawals and net outflows
Financial market outlook 35% 7% Coronavirus pandemic 35% -
Coronavirus pandemic 32% - Changing corporate culture 23% 21%
Public trust in financial firms Public trust in financial firms like
like ours 29% 33% 22% 18%
ours
21
BSM2. In your opinion, what are some of the most important challenges facing your employer? (Base: Potential Breakaways; n=120)
BSM3. In your opinion, what are some of the most important challenges facing your practice? (Base: Potential Breakaways; n=120)RIAs: Views on
Independence
22Nearly 4 in 10 RIAs found their experience of
transitioning to independence easier than anticipated.
Experience of becoming and independent RIA
Worse than expected About the same Easier than expected
7% 55% 39%
23
RIA3A. Reflecting on when you became an independent RIA, would you characterize your actual experience as...? (Base: RIAs; n=330)RIAs say moving to independence was a positive.
RIAs endorse benefits of going independent
RIAs in Agreement
We had no issues accessing investment products. 89%
The transition to independent RIA was easier than imagined. 80%
I transitioned all the clients I wanted to keep. 78%
Losing the national brand was better for bottom line. 73%
The technology is better than expected. 72%
I had plenty of support from others in the industry. 69% vs. 61% in Fall 2019
Managing my own business was easier than anticipated. 66%
I was able grow my business more quickly than expected. 59% vs. 51% in Fall 2019
Managing legal/compliance issues was not as difficult. 55%
24
RIA4A. Do you think each of the following statements is True or False? (Base: RIAs; n=330)Bottom line: The grass is greener for RIAs
Quality Of Life After Becoming An Independent RIA
Worse than before About the same Better than before
2% 21% 77%
25
RIA3B. How would you characterize your current quality of life? Is it…? (Base: RIAs; n=330)Appendix
26Survey Demographics
Potential Breakaway to Independent Channel
Average AUM $100M
Average Age 50 yrs.
120 Average Tenure At
Current Firm
11 yrs.
Broker who is likely to
transition to independence in
the next 2-3 years
Average Tenure As
An Advisor
20 yrs.
Average Number Of
Weekly Working 44 hrs.
Hours
Discovered Current
Firm Yourself (vs. 30%
recruiter, friends etc.) 27Survey Demographics
RIA
Average Firm AUM $320M
Average Age 50 yrs.
330 Average Tenure At
Current Firm
13 yrs.
Advisor who already transitioned to
the independent RIA channel – either
as an owner, partner or employee
Average Tenure As
An Advisor
16 yrs.
Average Number Of
Weekly Working 42 hrs.
Hours
Discovered Current
Firm Yourself (vs. 67%
recruiter, friends etc.) 28Important information
About TD Ameritrade Institutional
TD Ameritrade Institutional is a leading provider of comprehensive brokerage and custody services to more than 5,000 fee-
based, independent registered investment advisors and their clients. Our advanced technology platform, coupled with
personal support from our dedicated service teams, allows investment advisors to run their practices more efficiently and
effectively while optimizing time with clients. TD Ameritrade Institutional is a division of TD Ameritrade, Inc., a brokerage
subsidiary of TD Ameritrade Holding Corporation.
About TD Ameritrade Holding Corporation
Millions of investors and independent registered investment advisors turn to TD Ameritrade’s (Nasdaq: AMTD) technology,
people and education resources to help make investing and trading easier. Online or over the phone. In a branch or with an
independent RIA. First-timer or sophisticated trader. Our clients want to take control, and we help them decide how -
bringing Wall Street to Main Street for more than 40 years. An official sponsor of the National Football League for the 2016
season, TD Ameritrade has time and again been recognized as a leader in investment services. Visit TD Ameritrade's
newsroom or amtd.com for more information.
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