RIAs, IBDs gobbling up advisors face a new challenge

Independent brokerages and registered investment advisory firms are winning the financial advisor recruiting race, but they can't afford to get complacent, a new study found.

Those two channels have reaped the largest net increases in registered representatives across the past five years, according to a study released last month by data, analysis and events company ISS Market Intelligence using its MarketPro Discovery tool, which was formerly known as Discovery Data. Using an all-inclusive method counting every type of registered representative across brokerages and RIAs, the company reported that the number switching firms last year climbed by double digits to a three-year high of more than 39,000.  

The finding came alongside other studies documenting the rising advisor movement and dominance of independent brokerages and RIAs in general and LPL Financial in particular. But LPL rivals such as Raymond James are driving their own recruiting victories in those conditions as well. And increasingly giant RIAs could soon face more competition for top advisor talent, as they approach the size of the very firms that they have attracted advisors to leave in search of greater autonomy and flexibility.

"We're seeing continued, rapid consolidation, and it's affecting thousands and thousands of advisors a year," said Jodie Papike, CEO of independent advisor and wealth management executive recruiting firm Cross-Search.

Several factors, she said, are leading to more teams changing forms: Frequent M&A deals; healthy recruiting offers from both private equity-backed and publicly traded firms that are accelerating to an "honestly insane" level; and a longstanding trend among advisors to independence and flexibility. Ironically, that very success may also pose retention challenges in the long term. 

"There are so many RIAs where you're actually an employee," Papike said, pointing out the advisors' W-2 status and lack of ownership of their businesses in many cases. "It's almost as if a lot of these RIAs function more like a wirehouse than an independent."

Over the past five years, though, the figures displayed some clear patterns.

"What we continue to see across the U.S. wealth landscape is steady migration toward independence, with advisors and reps increasingly moving to a more fragmented RIA market," Alan Hess, a vice president at ISS and the author of the study, said in a statement. "These dynamics make it more important than ever for firms to understand where advisors are moving and how to effectively engage them."

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One clear winner, but plenty of advisor movement

Out of the top 10 firms in terms of the net gains of reps in the past five years, half of the companies are independent brokerages. Two of them — Raymond James & Associates and RBC — came from a brokerage channel the report classified as "traditional," which is a more understandable way to describe companies that industry professionals often call "regional" firms. Fisher Investments and Creative Planning represented the "retail RIA" channel in the top 10 list, while Empower Financial Services was the lone insurer-owned firm to make the ranks.

Regardless, LPL's place as the No. 1 firm in net rep additions likely came as no surprise to advisors and other industry observers who have been following the firm's recruiting and M&A activity. The company topped every other competitor on the advisor recruiting trail by more than 6,000 and outpaced the net gain of the entire independent brokerage channel as well.  

"The firm has aggressively and heavily invested in recruitment, working to institute competitive payouts, flexible transition packages, accommodation for multiple kinds of business models, and significant spending on technology," according to the study. "The firm's scale meant it also had a notably higher number of representatives leaving, an additional consequence of the firm's aggressive acquisitions of other distributors."

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A much different industry from 15 years ago

The 2007 demise of the "Merrill Lynch rule" or the "broker-dealer exemption" that once allowed wealth management firms to collect commissions for advisory services has kickstarted the wholesale change of industry classifications. Just 15 years ago, brokerage-only registration was the most common type.

Last year, the number of reps who were only registered with an RIA was more than double the amount in 2010. The number registered with both an RIA and a brokerage has reached nearly the same level as that of brokerage-only reps 15 years earlier.  And the number of brokerage-only reps has tumbled by 41%.

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Demographics suggest this flow will continue

The number of reps switching brokerages or RIA firms in 2025 amounted to just under 5% of the total across the industry. However, that volume represented the largest figure since 2022, the third-highest amount in the past decade and the first time in the last 10 years that the number has increased for three years in a row.

A well-documented graying of the advisor population will likely lead to more movement in coming years for succession planning and other exit ramps from the industry. More than 100,000 reps, or 14% of the total ranks across the industry last year, have tenures of at least 32 years in finance, the study found. Just 5% of the total had that much experience in 2010.

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The continued momentum toward independence, with an asterisk

Five-year net gains of nearly 10,000 additional reps at RIAs and another 5,700 for independent brokerages came with another continuing trend toward industry consolidation, the study said.

"This shift toward independence has occurred as the need for intermediaries to act more holistically has increased," it said. "The importance of taking a broader view of a client's goals and how to achieve them means that many reps will spend less time on the intricacies of investment management. All else being equal, this would give an advantage to more centralized channels with greater resources offering more internal opportunities to offload existing tasks."

So the RIAs and independent brokerages will attract more teams from the employee channels of the industry, but that need among advisors for scale and resources will give them a vested interest in operating more like the firms those teams left for greater independence. And moves by advisors between firms in the same channel still constitute the most common type.

"Reps change firms for a variety of reasons, including higher payouts, greater independence, better technology and platforms, more compliance support, access to alternatives and a desire to change business models," the report said. "The largest shifts, however, occur within similar firms. Cross-channel movement is an inherently more complicated endeavor, requiring larger changes to a rep's workflow and potentially fundamental shifts to how they approach topics like regulation and compensation."