Fidelity survey finds brokers favor independence

SAN FRANCISCO, April 7 (Reuters) – Most financial brokers
and advisers find independence from big brokerage houses
attractive, but the cost of regulatory compliance is keeping
many of them from making the move, a new study by Fidelity
Investments found.

Fifty-six percent of 1,046 investment professionals
surveyed late last year said the independent model has become
more attractive in today’s economy, with nearly 70 percent
expecting independence to offer greater earnings potential over
the next 18 months.

The survey, released on Thursday, is Fidelity’s fifth
report since 2005 examining attitudes among brokers and
advisers. Interest in independence was among the highest this
year, Fidelity said.

The findings support the increasing popularity of brokers
switching from large Wall Street firms, known as wirehouses, to
independent broker dealers or registered investment advisers.
Dissatisfaction with work at full-fledged brokerages and the
desire for more money and independence are driving the trend.

“The independence trend is firmly in place,” said Sanjiv
Mirchandani, president of Fidelity’s National Financial unit,
which has about $470 billion under custody.

“It might accelerate going forward,” he said. “There’s a
secular trend from people going from wirehouses to independent
broker dealers or registered investment advisers. The fly in
the ointment in the independent model is that potentially they
are concerned about what is on the horizon with regard to
increased compliance.”

Among the 18 percent who said the independent model was
less attractive, the leading reason was the expected costs of
complying with impending regulations.

The survey also found that brokers are getting older, with
almost half over 50. While the average expected retirement age
is 68, nearly one-third have not started to think about
retirement and another 10 percent are not sure what to do about
retirement planning.

Registered investment advisers, or RIAs, are independent
fee-based businesses run by financial advisers while
independent broker dealers provide a variety of services such
as regulatory compliance. Hybrid models that allow brokers to
earn money from fees and commissions are also becoming more

In both cases, brokers keep most or all of the money they
earn from clients and have more say over how to run their

Fidelity has a stake in brokers becoming independent
because its National Financial unit holds money on deposit from
independent broker dealers and clears trades for them.

Fidelity also has an Institutional Wealth Services unit
that caters to registered investment advisers and has about
$500 billion under deposit, ranking it second to Charles Schwab
Corp’s (SCHW.N: Quote, Profile, Research) Advisor Services business, which has $655

Career satisfaction rebounded to around 2007 levels, before
the financial downturn, to 7.4 on a scale of 10. The index had
sunk to 6.9 in 2008, the survey found.

Still, 17 percent reported switching firms in the last
three years, with seven in 10 of those joining an existing
firm. The top reason for changing was that brokers were not
happy with changes in their existing firm’s direction.
(Reporting by Philipp Gollner, editing by Bernard Orr)

Fidelity survey finds brokers favor independence