With so much turbulence lately in the brokerage industry, many advisers may be thinking about their next move, including a switch to independence.

Still, advisers who have spent their careers with a wirehouse or regional broker-dealer may wonder if the perceived risks outweigh the potential upside.

Three main fear factors keep advisers from considering the RIA model: financial uncertainty, business operation risks and the potential for losing clients, says Scott Collins, director of brokerage independence at TD Ameritrade Institutional.

A TD Ameritrade Institutional survey this year found that among brokers considering a switch to the registered investment adviser model, there are three main fear factors that keep them pulling the trigger: financial uncertainty, business operation risks and the potential for losing clients.

Let's look at each of these concerns and see whether, instead of serving as obstacles, they can become motivators for pursuing greater success.

1. Financial uncertainty. Becoming an RIA means giving up steady income from an employer, yet for the entrepreneurial adviser looking for more opportunity, this fear may be largely unfounded.

For example, more than 75% of advisers who become RIAs said that they were better off financially, according to a recent Envestnet industry study.

RIAs keep 100% of the revenue that they generate. They also fund 100% of their operating expenses, yet those expenses are often much lower than many advisers realize.

“After becoming an independent RIA, our firm was more profitable,” says Ryder Brose, a partner at Baker Brose & Mitsutome Wealth Management in Walnut Creek, California.

“Even as our assets under management grew, our expenses remained the same. This is a key difference between the RIA and the independent broker-dealer model, where a firm’s expenses are largely based on the assets they manage,” Brose says.

Perhaps more importantly, RIAs build business equity that may be monetized down the road.

2. Operational risk. Moving to a new business model is a big commitment, yet this transition can be successful because of the many third parties offering support services to help RIAs launch and operate their firms.

Custodians, for example, offer streamlined new-account opening and dedicated transition resources. Technology companies and other vendors also offer transition resources to help streamline the process.

Custodians also serve as record keepers of RIA firm assets and work to offer a full range of investment solutions to suit the needs of advisers and their clients.

An open approach means that an RIA can select the products that are most appropriate for their clients without pressure to promote an employer’s proprietary products or services. A custodian offering a fully open architecture means that advisers also can make their own decisions on every key business investment, including technology.

Significant tech innovations over the past decade have improved efficiencies for advisers and the experience of their clients.

By choosing from the offerings of third-party vendors, independent advisers can use technology that exceeds what is available at wirehouses and independent broker-dealers, according to a 2015 study by Advisor Growth Strategies.

“You'd be hard-pressed to find a technology platform that’s better than what I have at my firm,” says Craig Moddelmog, president and chief investment officer of Cornerstone Wealth Management in Fort Collins, Colorado.

“I balance entire portfolios and open new accounts in minutes,” he says. “Think about the amount of capacity that's been freed up so I can spend more time with clients.”

3. Client uncertainty. Advisers who move to the RIA channel typically see 91% of their targeted assets transfer with them, according to industry research firm Cerulli Associates.

Cornerstone Wealth Management, for example, has seen its client assets grow by 50% since becoming an RIA three years ago.

To be sure, starting an RIA requires a significant investment of time to learn new systems, establish business processes and build a brand, among other challenges. Even so, many of these business expenses are one-time investments, while the long-time growth potential for RIAs is expected to be high.

RIA assets have grown an average of 11% a year over the past five years, compared with 8.6% across all wealth management channels, according to Cerulli Associates.

Fears aside, advisers who want to work more as business owners may want to consider the RIA channel. The model can offer more control over how they serve their clients, compared with working for a firm in the employee advisory channel that covers all the aspects of running a business.

Scott Collins

Scott Collins

Scott Collins is director of brokerage independence at TD Ameritrade Institutional.