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How to Pick Between Indie Broker Dealers and RIAs

July 17, 2017

For financial advisors considering going independent it’s important to understand the differences in career paths offered by independent broker dealers and RIAs, Mindy Diamond writes on WealthManagement.com.

For starters, advisors are more likely to get some transition funds from IBDs, from 25% to up to 125% of their revenue, she writes. And while national RIA firms may offer some sort of monetary package, advisors joining a RIA aren’t technically independent as they work on a W-2 model, according to Diamond. What’s more, advisors leaving a brokerage may feel more at home with an IBD as they tend to offer more support for breakaways than RIAs, she writes.

On the other hand, advisors joining IBDs are limited to the platforms and technology offered by the firm, according to Diamond. While that’s less limiting than working as a wirehouse advisor, those who favor more customization for their practice may want to look to RIAs instead, she writes.

In addition, the culture at an IBD may feel wrong to breakaways, according to Diamond: IBDs certainly attract some top producers but advisors keen on building true enterprise practices are more likely to be found at RIAs and hybrids, she writes.

Finally, buyers and sellers are less likely to look at IBDs because of the overrides and the limitations they put on their advisors, according to Diamond.

Mindy Diamond

Advisors may be tempted to go the highest bidder, she writes. But they must weigh whether getting that transition money now could, down the line, hurt the value of the business they’ve built, according to Diamond. Regardless of whether they choose a RIA or an IBD, however, both offer more independence to breakaway advisors, she writes.

By Alex Padalka
  • To read the WealthManagement.com article cited in this story, click here.