MINNEAPOLIS, Dec. 16, 2021 /PRNewswire-PRWeb/ -- Featured November 30, 2021 on ThinkAdvisor.com, independent broker dealer recruiter Jon Henschen's article "5 Reasons Going RIA Beats the IBD Model" shows several reasons why going the route of RIA is a good option for many investors. He explains how there is greater transparency for the costs, broader product choices, more turnkey options, limited paperwork, and also easier marketing.
Henschen starts with two primary threats to independent broker-dealers are advisors retiring or going the RIA/dual-clearing route. Even though many broker-dealers have become friendly to advisors who to want operate with a hybrid approach, many of the larger BDs have been shutting the door to dual clearing. As a recruiting firm evolving deeper into the RIA space, he sees 5 factors as the primary drivers of growth in the RIA/dual-clearing model.
He points out the RIA world reduces many costs and does away with platform fees and markups. Advisor-directed administration fees can run from 10 to 20 basis points on assets in the clearing firm world. But in the RIA world, a flat charge is the norm, which means the cost for clients in this one area drops by up to 90%.
Henchen also shows how RIA's allow for more product choices. Around 2016, driven by proposed regulations at the time, many broker-dealers cut back on the number of money managers they worked with. BDs also favored larger managers with long track records. As an RIA with dual clearing, the world can be your oyster. You'll have a much broader selection of managers, as well as new, up-and-coming managers with stellar performance histories and/or unique allocations like highly concentrated positions.
Another benefit that Henschen shows is the amount of paperwork needed to transfer and open accounts can be oppressively long at many broker-dealers. But when prospects see the stack of forms that must be reviewed and signed, they are turned off. Paperwork complexity raises red flags to potential clients, eroding trust.
Henschen notes that for most independent advisors at broker-dealers considering taking the plunge to RIA, one primary reason they don't is they often expect to monetize their production (i.e., their fees and commissions) when they make any sort of move. It's telling that these firms that tout their corporate cultures always write advisors a big check to entice them to join. For an advisor to adhere to a fiduciary standard, though, costs and product choices cannot have any conflict of interest, and client interests must be placed above advisor interests.
It's not by chance that the RIA channel is the fastest growing, with IBDs ranking second in terms of recent growth. The channel losing the most representatives is that of the wirehouse firms, followed by insurance broker-dealers and bank BDs.
Jon Henschen is founder of http://www.henschenassoc.com, an independent recruiting firm focused on independent broker dealers and RIAs based in Marine on St. Croix, MN. With more than 30 years of industry experience, Jon is a staunch advocate for independent financial advisors, and is widely sought after by both advisors, broker dealers and RIAs for his expertise and insight on industry topics. He is frequently published and quoted in a variety of industry sources, including Wealth Management, ThinkAdvisor, Investment Advisor Magazine, Wealth Management Magazine, Financial Advisor IQ, Financial Advisor Magazine, Investment News and others.
Media Contact
Jon Henschen, Henschen & Associates, 7578464107, [email protected]
SOURCE Henschen & Associates
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