Brokers keen to break free from large companies have driven an 8 per cent rise in the number of US registered investment advisors from 2004 to 2008, compared with a 1 per cent contraction in other advisory channels, according to Cerulli Associates.

Brokers keen to break free from large companies have driven
an 8 per cent rise in the number of US registered investment advisors from 2004
to 2008, compared with a 1 per cent contraction in other advisory channels,
according to Cerulli Associates, a research firm.

The firm’s December 2013 issue of The Cerulli Edge-US Asset Management Edition examines the RIA
channel's evolution, how third-party vendor platforms reach advisors who value
flexibility, and the emergent phenomenon of ETF strategists.

"The RIA channel has been one of the most buzz-worthy
trends in the financial advisory and asset management industry in recent
years," states Bing Waldert, director at Cerulli. "RIAs are the sole
growth story in a shrinking industry,” Waldert said.

According to Cerulli, multiple factors have fueled the
growth of this channel, most prominently the so-called "breakaway
broker" - an advisor or team with an established practice choosing to
leave an employee broker/dealer and creating their own advisory firm.
Transitioning advisors have not only come from employee broker/dealers but also
from independent B/Ds, it said.

"While the 'Breakaway Broker' has been an important
driver of change, it is not the sole source of growth for the RIA
channel," Waldert said. "Non-traditional competitors, such as law and
accounting firms, have entered the advisory industry," he said.

"The unique challenges of business ownership are no
longer an obstacle for a breakaway advisor," Waldert said.

While most RIAs (70 per cent) are “very optimistic” about
their business growth prospects over the next five years, a similar amount
anticipate greater market competition for new assets, according to a recent
Independent Advisor Outlook Study from Charles Schwab, issued at the firm’s
recent IMPACT conference in Washington,  DC.

Of the 800 RIAs surveyed - representing $228.5 billion in
assets under management - 44 per cent believe that regulatory changes will
“make other advisory models look more like independent RIAs.” The need to
differentiate from the competition is therefore “greater than ever,” according
to 60 per cent.