In the last decade, the financial services industry has seen an increase in the number of investors seeking out independent advisors as opposed to affiliated advisors. Why is this happening? Many think that a full-service broker affiliated with a large company offers a higher level of investment expertise, while others are lured by the promise of objective advice and research from an independent advisor.

Demographics such as age, occupation and gender also play a role in advisor choice. While the majority of investors may still select affiliated advisors, those who do choose independent ones are more likely to be young, married and professionals (such as attorneys, physicians or senior corporate executives). This is most likely because of a recommendation they have received from someone within their peer group who is already a client of an independent advisor.

The key issue is that younger investors—those between 35 and 54—are more likely to choose an independent advisor. This is critical because these individuals are among those just starting to develop advisor relationships. In analyzing whether independent advisors appeal to any specific occupational segment, only one shows a clear preference toward independent advisors: physicians and dentists. (Senior corporate executives are also somewhat more likely to go that route.)

Another aspect of the "independent versus affiliated" choice is the client's perception of the brand awareness of the advisor's employer. Those opting for affiliated advisors say that having a well-known company standing behind the advisor is critical. Surprisingly, even one-third of those working with a supposedly independent advisor say that the advisor's association with a well-known brand was an important factor in the selection. (In many cases this may be a well-known regional or local brand and is essentially just the company through which the advisor clears transactions.)

The type of advisor is also a factor in a client's decision whether to opt for the independent or affiliated model. When choosing a primary advisor, almost half of investors working with an affiliated advisor chose a full-service broker—someone perceived as being able to provide a holistic plan and more of a one-stop-shopping experience with greater resources. Investors who prefer working with independent advisors look to accountants, independent financial planners and registered investment advisors as their primary advisors.

The Bottom Line Is Client Loyalty

With all of the choices at clients' disposal, the bottom line may be that, in the debate over independent and affiliated advisors, satisfaction levels simply run higher with the independents. And satisfaction leads to loyalty—the Holy Grail of advisory services. Interestingly, though, loyalty seems to have limits. The share of respondents who say they'd definitely continue to work with their current advisors and transfer assets if those advisors were to change firms-perhaps the real definition of loyalty-is about the same regardless of whether the advisor is affiliated or independent: roughly one-third. But the percentage of investors who say they "might" follow a departing advisor is much higher for those using independent ones. In fact, only 11% of those working with independent advisors say they'd definitely stay at the current provider if their advisors chose to switch firms. Among investors using affiliated advisors, twice that many say they'd stay at a firm if the advisor left.

These results clearly illustrate that, with an independent advisor, the client's loyalty is more often to that advisor than it is to the firm. This opens up an opportunity regarding the investors who say they're unsure whether they'd follow their advisor to a different firm.

Tips for Both Sides

Of all the factors in play when an investor chooses an advisor, there doesn't seem to be one clear-cut "golden rule" or magic formula. There are factors that affect the decision to go either way. However, keeping in mind that there are some points on which most high-net-worth clients agree, here are a few suggestions for any advisor looking to snag a few more of them:

• Affiliated advisors need to better position themselves as a resource for objective advice and investment research, as this is an area where independent advisors are seen to have an advantage. (The perception of objectivity is the main reason investors choose an independent advisor.)
  

• Affiliated advisors must make sure they are seen as unbiased in terms of access to expertise. They also can't be seen as pushing product. Every investor wants an advisor who's working in the client's best interest.

• Affiliated advisors should also reassess the effectiveness of their seminars-almost a third of investors described them as "poor."

• Independent advisors should make an effort to promote the ability to offer a more personalized level of customer service. While almost half of investors working with independents do so in order to receive advice and investment research that's more objective, less than 10% cited personal attention as a driving force. This is where independent advisors-who have a perception of "expertise" that must be enhanced with service-could attract clients who may be disenchanted with larger firms.

• In order to attract investors who are more Web-savvy, independent advisors must also consider enhancing their online services, where they are perceived as lacking in their offerings. The demand for greater online access to information is only going to increase.

• Overall, greater personal attention, a commitment to an online presence and a greater array of advice options will help the independent advisor compete with any affiliated rivals. And, affiliated advisors should take heed.