Last updated: 10:20 / Tuesday, 3 December 2013
Remaining Advisory Channels De

Breakaway Brokers Fuelled RIA Channel Growth Over the Last Decade

Breakaway Brokers Fuelled RIA Channel Growth Over the Last Decade

The number of advisors practicing in the registered investment advisor (RIA) model grew at an annualized rate of 8% between 2004 and 2012, while every other advisory channel declined by more than 1% during the same timeframe, according to the latest research from Cerulli Associates.

"The RIA channel has been one of the most buzz-worthy trends in the financial advisory and asset management industry in recent years," states Bing Waldert, director at Cerulli. "RIAs are the sole growth story in a shrinking industry."

The December 2013 issue of The Cerulli Edge-U.S. Asset Management Edition examines the RIA channel's evolution, how third-party vendor platforms reach advisors who value flexibility, and the emergent phenomenon of ETF strategists.

According to Cerulli, multiple factors have fueled the growth of this channel, most prominently the so-called "breakaway broker" - an advisor or team with an established practice choosing to leave an employee broker/dealer (B/D) and creating their own advisory firm. Transitioning advisors have not only come from employee B/Ds, but also from independent B/Ds.

"While the 'Breakaway Broker' has been an important driver of change, it is not the sole source of growth for the RIA channel," Waldert explains. "Nontraditional competitors, such as law and accounting firms, have entered the advisory industry."

"The unique challenges of business ownership are no longer an obstacle for a breakaway advisor," Waldert continues.

“The RIA channel expanded from a cottage industry to an essential element within the financial advisory and asset management space”, concludes the report.