Rudy Adolf, founder and CEO of Focus Financial Partners, reports that 2012 was a “terrific year” for the independent advisory industry, which further expanded its market share.
His firm believes that $150 billion to $200 billion of client assets transitioned towards independent RIAs in 2012, one of the largest moves ever. “Focus, the leading partnership of independent wealth management firms, increased client assets by $14 billion,” he says, “to close out the year with nearly $60 billion in assets.”
Here is how Adolf sees 2013 shaping up:
- Asset and market share loss of the brokerage industry will continue at a similar pace.
- Client retention for brokers going independent will further top intra-wirehouse moves (asset retention of 95% for the former, 65% for the latter). Brokers’ disadvantage will further increase with new disclosure rules of recruiting bonuses by wirehouses.
- Wirehouses won’t be able to "fix" their business models. Perennial expense and service re-engineering attempts along with feeble cross-selling and opaque high-margin products will continue to squeeze clients and advisors.
- Brand damage based on corporate malfeasance will continue as legacy technology, product and compliance platforms continue to stymie wirehouses. Brokers are getting increasingly tired of apologizing to their clients.
- The most sophisticated teams in the industry will pursue independence. As word spreads of successful transitions, more of these teams will seriously contemplate independence.
- Brokers who are intrigued by the independent model but unwilling to set up their own firm will consider joining existing RIAs.
- Wirehouse management will face increasing pressure from regulators, their boards and shareholders to justify economically irrational recruiting and retention bonuses.
The “net-net,” as Adolf puts it, is that it will be good to be independent in 2013, but tough to be a broker.