Keeping advisors happy is becoming more important in light of one industry trend
Some clients seek professionalism, and others are more interested in feeling cared for. No matter their preference, one thing is clear; the human touch of an advisor is crucial in the wealth business. And the need to retain talent is heating up in the face of a major trend.
According to a new report from Fidelity, Insights from Independent Broker-Dealers (IBDs), US$136 billion have changed hands among IBDs as a result of five deals so far this year. These were driven by large IBD acquirers, broker-dealer firms with over US$10 billion in assets.
“[W]hile we are seeing fewer IBD deals compared to RIA [registered investment advisor] deals, those that are taking place are significant, both in size and in how they are creating innovative business options and platforms for advisors,” said Scott Slater, vice president for practice management and consulting at Fidelity Clearing & Custody Solutions.
Because of such transactions, the IBD channel is getting concentrated into a small number of large firms. Citing data from Cerulli Associates, Fidelity said the top 10 IBD firms now run 65% of all broker-dealer assets and 48% of all broker-dealer advisors.
That concentration comes as regulatory compliance costs, technology investments, and advisor education expenses put an increasing strain on IBD’s bottom lines. Advisor productivity has also been lagging, with IBD advisors managing an average of US$32.9 million, as opposed to those at RIAs with US$66.6 million.
As IBDs seek to preserve their margins through mergers and acquisitions, they are also adopting measures to ensure they balance size with culture. While standardizing practices and procedures to improve efficiencies, large IBD acquirers maintain their focus on advisor engagement, management continuity, and productivity improvements.
Acquirers are also appealing to advisors through various value-adding propositions. These include:
For more of Wealth Professional's latest industry news, click here.
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According to a new report from Fidelity, Insights from Independent Broker-Dealers (IBDs), US$136 billion have changed hands among IBDs as a result of five deals so far this year. These were driven by large IBD acquirers, broker-dealer firms with over US$10 billion in assets.
“[W]hile we are seeing fewer IBD deals compared to RIA [registered investment advisor] deals, those that are taking place are significant, both in size and in how they are creating innovative business options and platforms for advisors,” said Scott Slater, vice president for practice management and consulting at Fidelity Clearing & Custody Solutions.
Because of such transactions, the IBD channel is getting concentrated into a small number of large firms. Citing data from Cerulli Associates, Fidelity said the top 10 IBD firms now run 65% of all broker-dealer assets and 48% of all broker-dealer advisors.
That concentration comes as regulatory compliance costs, technology investments, and advisor education expenses put an increasing strain on IBD’s bottom lines. Advisor productivity has also been lagging, with IBD advisors managing an average of US$32.9 million, as opposed to those at RIAs with US$66.6 million.
As IBDs seek to preserve their margins through mergers and acquisitions, they are also adopting measures to ensure they balance size with culture. While standardizing practices and procedures to improve efficiencies, large IBD acquirers maintain their focus on advisor engagement, management continuity, and productivity improvements.
Acquirers are also appealing to advisors through various value-adding propositions. These include:
- Leveraging technology – investments in platforms to improve the advisor and client experience;
- Reinforcing advisor independence – providing a range of operating models that support both fee- and commission-based business;
- Adopting transition-easing practices – learning from past experiences to create a positive first impression and smooth onboarding process; and
- Helping acquired advisors grow – investing in different ways to help advisors expand their books of business
For more of Wealth Professional's latest industry news, click here.
Related stories:
How to fix the advisory industry’s image problem
Does the investment industry have an uneasy relationship with disclosure?
