- The last five years have recorded a compound annual growth rate of 11%.
- The niche and institutional IBD segments are what have driven the growth of the channel.
- A risk is the migration to the independent RIA model.
According to Cerulli Associates , independent brokers / dealers (IBDs) have recorded a five-year compound annual growth rate (CAGR) of 11%, which exceeds B / D of banks (9%), as well as the national and regional B / Ds (9%) and almost double that of the wirehouses, of only 6%.
“IBDs have the second largest advisory strength with more than 59,000, a total that rises to 86,779 in the industry when hybrid investment advisors (RIAs) are included,” says Ed Louis , senior analyst at Cerulli. “However, channel size is not the explanation for growth.”
“To explain the growth, Cerulli shows four IBD sub-segments: True, Institutional, Niche and Insurance Legacy IBD,” continues Louis. “It is the segments of niche IBD (14%) and institutional (11%) that have driven the growth of the channel in the last five years. Institutional IBDs are the largest. Although there are only 24 in total, they control 49% of the channel’s advisors and 59% of the assets. The segment continues to benefit from the national scale, the reputation of the brand and the increase in the number of advisers through recruitment efforts and large acquisitions. “
According to Cerulli, the accelerated growth of the IBD channel makes it an attractive target for asset managers looking for broader distribution opportunities. According to Louis, “IBDs continue to be one of the most consistent opportunities for asset managers due to the large number of possible business associations, advisors and accelerated growth of the hybrid channel.” That said, to continue the pace of growth, Louis believes that the channel will need to evaluate succession planning models, improve advisors’ productivity and protect against large teams that migrate to the independent RIA model.
The latest Cerulli report, US Broker / Dealer Marketplace 2018: Escalating Margin Pressure , provides a comprehensive analysis of the market and competition of B / D channels, which broadly covers recruitment and transition trends, including the size of the movement of the advisor, advisor channel preferences, advisor retention, and transition metrics.