The hints have been there for a while, but Financial Planning’s 32nd annual FP50 ranking of independent broker-dealers reveals what appears to be a solid trend: An industrywide shift to fee-based service, in which IBDs increasingly resemble RIAs.

“The revenue figures among the top 50 IBD’s reveal the evolution,” Craig Israelsen tells me. Israelsen, a professor of financial planning at Utah Valley University and a longtime Financial Planning contributing writer, has analyzed the rankings for nearly two decades. “Fee revenue may surpass commission revenue when we do the survey next year.”

FP 50 2017

FP50 revenue slumped 2.46% last year from the prior year. The magnitude of that drop was even greater than the 1.38% decrease seen in 2009 at the end of the Great Recession.

“It was shocking to see such a big decline in revenues, even though we predicted last year that the IBD space should expect a reckoning,” says Senior Editor Ann Marsh, who wrote this year’s feature, “A Case for Optimism,” as well as last year’s, “The Reckoning Arrives.”

Yet even as 75% of the firms in this year’s rankings reported a revenue fall, there was a bright spot: Fee revenue rose for 80% of them.

Marsh tells me the shift has been underway for years. “Now that pace of change could accelerate unless there’s a big regulatory roll back,” she says.

Some of the biggest IBDs in the country say the move toward holistic planning is inevitable.

Amy Webber, CEO of Cambridge Investment Research, for one, says her firm has rebranded itself as a financial services firm, rather than a broker-dealer. And Robert Moore, CEO of Cetera Financial Group, says that kind of change is “structural.”

As Professor Israelsen says: “Times, they are a changin’.”

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