Cerulli Associates forecasts that independent registered investment advisors will continue to have the strongest headcount growth among advisor channels as practitioners continue to sever home office ties.
In its most recent U.S. financial advisor study, the consultancy estimates that independent RIA channels, representing fee-based RIAs with no broker/dealer affiliation, will see 4% compound annual growth through 2028, reaching 56,103 advisors.
“Our view is that technology will continue to make full independence less burdensome for advisors in their role as business owners,” said Andrew Blake, associate director in Cerulli’s wealth management group. “Additionally, the continued decline of brokerage/commission-based business will reduce the need for b/d affiliation.”
The forecast reinforces the years-long trend toward RIA independence, with insurance b/d headcount predicted to decline annually by 1.8% to 34,292 advisors and wirehouses dropping 1.9% annually to 39,448 advisors.
Independent b/d advisors, the second-largest vertical by headcount, is the only other growing channel through 2028 at 1.5% annually to 50,365 advisors, according to Cerulli.
Meanwhile, national and regional b/ds and hybrid RIA models are predicted to be flat through 2028.
The hybrid model represents independent RIAs who are primarily fee-based and have an affiliation with a b/d and assets either at an RIA custodian or a traditional independent b/d. Blake said the flat growth in that popular hybrid model is partly due to some of those advisors moving to full independence.
“Certain advisors who originally moved to a hybrid affiliation will take that a step further and become fully independent RIAs as the factors above give them the confidence to do so coupled with the allure of a greater payout,” he said.
However, the hybrid model should grow headcount in the longer term as it continues to poach from other channels. Cerulli notes a 10-year horizon for hybrid RIAs of about 4.7% compound annual growth.
“As options for advisor affiliation expand, the hybrid model is becoming a popular choice among large RIAs, particularly those pursuing inorganic growth,” Blake said. “The built-in b/d capability allows these firms to support advisor acquisitions and transition brokerage assets while still offering select commission-based products.”
Of course, wirehouses have been fighting back with their own RIA channel offerings aimed at greater independence. Commonwealth, LPL and Raymond James, for example, all offer fee-only platforms for advisors who want to operate independently but don’t want to run their own RIAs.
Cerulli’s estimates combine historical movement tracking and stated channel preferences from advisor surveying. It also factors in retiring advisors, trainees and one-time occurrences such as layoffs and hiring plans.
The report notes that advisories’ success in gaining and keeping new clients across all channels will, in part, hinge on their ability to keep and retain talented advisors.
“In pursuing inorganic growth strategies, firms should be mindful of growing advisor preference for autonomy and control and a desire to escape the bureaucracy of large firms,” Cerulli analysts wrote.
The firm noted the much-discussed $105 trillion wealth transfer and the need for advisory scale and adjacent financial planning services.
Despite the growing opportunity, new client acquisition was the top challenge advisors mentioned in a survey, with 55% agreeing it was an issue.
Cerulli wrote that many unadvised investors don’t see the value for money in paying for advice.
“Consistency in communication, being upfront about any substantial changes to a client’s portfolio, and being explicit about costs are important discussion points,” the firm wrote. “For affluent investors, transparency is the most important factor when choosing an advisor, even more so than demographic or performance-based considerations.”
After new client acquisitions, advisors cited their greatest challenges as compliance and regulatory responsibility (40%), managing technology needs (31%), and building multi-generational client relationships (31%). Developing a succession plan, which the industry widely considers important for maximum valuation, came in sixth among challenges at 23%.