The recent movement among financial advisers appears to be leaning towards the registered investment adviser model, with many large banking and regional brokerage teams breaking away and forming their own independent firms.
Just this week, a team of Merrill Lynch advisors with a reported net worth of $491 million left the wire to launch their RIA in Southern Pines, NC Another councilman duo from North Carolina with $700 million in client assets spun off from Merrill to join Sanctuary Wealth's standalone platform.
But a new survey by Cerulli Associates shows a different preference among investors. Thirty-nine percent of advised investors at all wealth levels said they prefer to work with an advisor who is employed by a national organization, whether it's a bank, broker/dealer or asset manager. This was also the top preference for investors not currently working with an advisor, at 32%.
This choice was even more pronounced among the wealthiest investors. Among those with $5 million or more in investable assets who already work with an advisor, 45% prefer to work with those employed by a large firm. Among unadvised investors, 37% of those with $5 million favor those advisors, 38% of those with $2 to $5 million have that preference, and 40% of those with $1 to $2 million lean that way.
The Cerulli report attributes these results to the fact that the affluent tend to skew older and have a greater comfort level with well-known brands.
Meanwhile, only 18% and 19% of advised and non-advised investors, respectively, prefer to work with an advisor who owns and operates their own locally based practice. Among the largest wealth levels (more than $5 million in assets) currently not advised, this drops to 11%.
“These overall levels of preference present somewhat of a challenge for emerging registered investment advisors (RIAs) and independent broker/dealer advisors (IBDs), as they rarely have high levels of unaided awareness among prospective clients in periods their need for critical advice.” says Scott Smith, director of consulting relations at Cerulli.
These local practices have a weaker showing among the less affluent who already have an advisor, with just an 8% preference among those making $100,000 to $250,000, which Cerulli says reflects “the challenge that local businesses have in competing with leading brands to acquire new customers”.
Online-only advisors were least favored across the wealth spectrum, with only 1% of respondents advised and 5% of respondents not advised.