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How Advisors Could Win from Consolidation in BD Space

By Alex Padalka September 22, 2017

Financial advisors looking to move or sell to broker-dealers are likely benefiting from growing consolidation in the industry. As the size of deals in the space grows, broker-dealer firms are focusing on improving the advisor experience, according to a recent report from Fidelity Clearing & Custody Solutions.

Year to date, the broker-dealer channel has had five deals representing the transition of $136 billion in assets, according to Fidelity. Each of the acquiring broker-dealers manages more than $10 billion in assets, which the report attributes to continued consolidation in the space.

While the top ten broker-dealers controlled 50% of assets under management in 2005, by 2015 that figure reached 65%, according to Cerulli Associates data cited by Fidelity. While the top ten represented 39% of all advisors in the channel in 2005, by 2015 they represented 48%, according to Cerulli.

Consolidation may be good news for advisors looking to move. Broker-dealers face rising costs as a result of increasing technology and regulatory compliance expenditures, according to Fidelity. In their bid to increase advisor productivity and revenue numbers, broker-dealers are standardizing their practices and seeking methods to improve efficiencies — but they’re also looking for ways to appeal to advisors looking to move and to retain them after an acquisition, the report says.

Broker-dealers are intent on letting incoming advisors maintain their independence, according to Fidelity. But larger broker-dealers are also looking for ways to make it more appealing for advisors to sell or join them, the report says. This means they’re continuously investing in technology, improving the onboarding process to make new advisors’ transitions smoother, and helping acquired advisors grow their books of business, according to Fidelity.