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More Than Three-Quarters of Financial Advisors Who Moved to Independence Report They Are Better off Financially, According to Fidelity® Study

Most Explored Multiple Business Models; Half Moved Without Strong Influence from Others or a Written Plan

Fidelity Investments® (Fidelity) today unveiled the Fidelity Insights on Independence Study, which found that more than three-quarters (76 percent) of financial advisors who moved to an independent business model report they are better off financially. Of those, 64 percent indicated they were better off within six months of their move.

The study is one of the first to explore the transition process itself: researching options, making the move and experiencing independence, as well as its short- and longer-term impact on advisors. It surveyed 173 advisors who chose an independent business model, such as an independent broker-dealer (IBD) or registered investment advisor (RIA), within the last five years.

Half of advisors who moved to independence did so without any strong influence from others or a written plan. On average, they explored two to three different business models before making a move.

“Advisors of all sizes are defining independence on their terms, and reporting financial success as well as personal satisfaction,” said Michael R. Durbin, president, Fidelity Institutional Wealth Services®. “What’s most critical in exploring independence is that advisors understand their options and choose the right fit -- whether that’s starting an independent advisory firm, joining an independent broker-dealer or creating their own model.”

“This study validates what we’ve been seeing in the marketplace. Advisors seeking independence are interested in the flexibility to design their practices, choose their products and define their brands. And, they’re open to exploring a variety of business models,” said Sanjiv Mirchandani, president, National Financial, Fidelity’s clearing and custody company. “As a leader in both the independent broker-dealer and RIA space, we support more models and, as a result, are able to consult with advisors as they consider their options for independence.”

Researching the Move – A Solitary Experience

More than half (54 percent) of “movers” to independence did so without any strong influence from others and eight out of 10 (80 percent) made the switch alone (20 percent moved as a team). The study found that half of the advisors transitioned without a written plan, yet their principal suggestions to others considering a move were to do research and be organized.

Response from Clients

Advisors said their “biggest surprise” regarding their moves was the number of clients who did -- or did not -- move with them. Advisors reported that 39 percent of their clients were immediately supportive or pleased with their decision, another 43 percent were initially surprised but ultimately supportive, while only 18 percent were initially concerned but ultimately supportive. Nearly nine in 10 (86 percent) of newly independent advisors said that all or most of their clients moved with them.

“One of the most rewarding parts of our transition to independence was the reaction from our clients,” said Greg Erwin, co-founder and partner of Sapient Private Wealth Management. “They really responded to our new way of looking at their portfolios. We could not be happier with our decision to start our own firm.” Greg shares more about his move to independence here.

Reflecting on the Move

When considering their original motivations, most of the advisors reported that they were “where they wanted to be” toward meeting their goals. Nine out of 10 report that they were happy with their decision to pursue independence, with nearly half (45%) indicating they knew immediately it was the right move. The No. 1 insight advisors said they wished they had known before transitioning was that they should have made the move sooner, followed, at No. 2, by a feeling that independence is better.

Advisors reported some complications with the transition process -- 58 percent said that it was somewhat or extremely difficult to re-paper their clients’ accounts.

Insight for Advisors Considering a Move

When asked for their suggestions to other advisors considering a move -- in addition to “do research” and “be organized” -- they said:

• Know what you want and make sure it’s a good fit

• Talk to others who have moved

• Do what’s best for clients

To help advisors considering a move toward independence, Fidelity offers a confidential referral service through which advisors can link to advisors who have already gone independent. The company consults on a range of options for independence -- from joining an independent broker-dealer (IBD) to starting a registered investment advisor (RIA) firm.