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How Big Is the Breakaway Opportunity?

The number of advisors that will leave the wirehouses and start their own RIA is much smaller than you think, says PFI Advisors.


There are 50,000 advisors in the four major wirehouses: Merrill Lynch, Wells Fargo Advisors, UBS and Morgan Stanley. The registered investment advisor industry loves to brag about the exodus of those advisors leaving the wirehouses and joining the RIA channel.

“The RIA press would have you believe that every single one of those advisors will be independent by 2025,” said Matt Sonnen, founder and CEO of Hermosa Beach, Calif.-based PFI Advisors.

In a new video, Sonnen argues that the size of the breakaway opportunity is actually much smaller than people expect. Ninety percent of those 50,000 will, in fact, never leave the wirehouses; they may place an exploratory call to a custodian or recruiter, but in the end, they won’t make a move.

That leaves 5,000 advisors. But Sonnen says 90% of those advisors will simply play musical chairs among the four wirehouses. “They want to stay within the environment they know and understand.”

That leaves just 500 who will consider going independent, but 90% of them, he argues, are not entrepreneurial. They may join an independent broker/dealer or an existing RIA, but they won’t start an RIA.

So now we have 50 advisors who want to leave the wirehouses and have an entrepreneurial spirit.

“But 90% of this group still won’t want the hassle of setting up phone systems, figuring out compliance and HR for their employees,” the video states.

Those advisors will likely choose a platform provider that allows them to plug into existing systems.

Now we’re down to five “brave souls who truly want to build an RIA from scratch.”

These five advisors will want to own 100% of the equity in their firm, they’ll want a fully customizable back office, and they’ll usually build scale via mergers and acquisitions, according to the video.

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