TD Ameritrade Institutional attracted 120 breakaway brokers to its platform for independent registered investment advisors in the third quarter of last year, a nearly 50% from a year earlier.
In the first three quarters of its fiscal year, 324 breakaway brokers have joined TD Ameritrade, up 23% from a year earlier. For all of last year, TD Ameritrade attracted 348 breakaway brokers.
Pete Dorsey, the managing director of sales at TD Ameritrade Institutional, said in an interview Tuesday that he sees this trend continuing because clients are demanding it.
“Investors have more choices today and they are voting with their feet,” he said. “Clients see the benefit to having a fiduciary on the same side of the table as them.”
According to the TD Ameritrade Institutional Advisor Survey, client client assets continue a move to the independent advice channel. RIAs report 57% of their new assets are coming from traditional full-commission firms.
Dorsey said he remains “cautiously optimistic” that the trend will continue.
“We are just two weeks into our fiscal fourth quarter, but I do feel confident based on our pipeline and the momentum, that we will surpass last year’s growth,” he said.
As a result of the breakaway broker trend, many wirehouse have tried to adjust over the past four year, Dorsey said.
“There was a seismic shift in people leaving the wirehouses beginning in 2008, but there are smart people in the wirehouses and and they started to try to lock folks up with retention packages,” he said. “In the last year or so, as three- and five-year deals have expired, brokers are starting to look around and consider other options.”
And five years later, market conditions have improved and an array of new alternatives, including aggregators like Dynasty Financial and HighTower, have more brokers considering breaking away, Dorsey said.
“The wirehouses are doing what they ca, but they have a business model that is conflicted in many way,” he said. “There is definitely a crisis of confidence on Wall Street.”
Since 2008, wirehouses have seen their market shar decline from 56% to 45%, according to Cerulli.
The “tuck in” trend for breakaway brokers choosing to join an existing firm holds steady. Twenty-seven percent of new breakaway brokers joining the TD Ameritrade Institutional platform in fiscal 2012 have chosen to join an existing independent RIA, down 3% from last year.
“Many advisors are good at managing money and working to improve the financial lives of their clients, but not every advisor is interested in the operational side of running a practice,” Dorsey said. “Brokers that choose to join an existing firm walk into a business that has an established back-office system and support, and that can be a very attractive option for some advisors. It really just depends on what works best for the advisor and their clients.”