Advisors continue to flock to the RIA business model, making it the fastest-growing corner of the financial services industry. However, even as they do, more than ever are hanging onto commission income, despite the risks it poses to acting as full fiduciaries.

“Whether or not it’s the most pure of a fiduciary standard – and I don’t think it is – [retaining commission income] maximizes flexibility on revenue for the advisors so that’s why they are choosing it,” says Tyler Cloherty, a senior analyst at Cerulli & Associates who studies the RIA space.

“What advisors essentially are doing is splitting their assets and leaving about 30% under their B-D and keeping about 70% under their RIA,” Cloherty says. “More advisors are choosing to keep with [a dually registered model] in the long term instead of using it as a transitional business model. Ultimately, it comes down to not what’s good for the client but what’s good for the advisor.”

The numbers bear this out. Many observers were surprised to find that in 2011 more advisors entered the dually registered channel, despite the risk of conflicts, than the independent RIA channel, Cloherty says. Overall there were10,357 independent RIAs and 4,659 dually registered firms in 2011, but only 783 new entrants to the former and 1,187 to the latter.

In terms of growth, the RIA sector crested a cumulative $2 trillion in AUM in 2011 and drastically outpaced the growth rate of the ret of the financial services industry, growing at 13% versus 1.3%.

For more on the country’s largest RIAs, see Financial Planning's list of top RIA firms.

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