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The Monte Carlo Merry-Go-Round Do models make advisors too cautious?

Is The 60 / 40 Back? The managers at the George Putnam Balanced Fund say it never went away.

OR DECADES, THERE WERE FEW BETTER PROXIES FOR THE health of the financial planning business than the independent broker-dealer business. Forty years ago, advisors frustrated by the divergent priorities of giant Wall Street wirehouses and investment banks were able to set up businesses free from proprietary products and other conflicts, thanks to the IBD boom.

But as senior editor Eric Rasmussen chronicles in Financial Advisor’ s annual Independent Broker-Dealer Survey this month, a funny thing happened on the road to independence. Many advisory firms are now transitioning to their second or third generations, and the process is as varied as the firms themselves.

For the next generation of advisors, the opportunity is vast, but it’ s also magnified by the shortage of new entrants into the business. Estimates on this subject vary, but some IBD executives estimate that as many as 100,000 advisors could retire in the next decade, even as the demand for financial advice from millennials explodes.

Today, the RIA model is growing faster than the myriad brokerage models. With the amount of private equity investment in many leading RIA firms, that model may be in a stronger position to attract talent and handle the anticipated growth. But there’ s increasingly a large degree of overlap between both the RIA and IBD business worlds. Back in 2022, a Schwab executive estimated RIAs would need 85,000 new advisors to handle the combination of growth and attrition expected over the next five years. That leaves plenty of room for broker-dealers to compete.

For the next generation of advisors, the opportunity is vast, but it’ s also magnified by the shortage of new entrants into the business.

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Independent Broker-Dealers

IBDs are in a good position to capitalize on an advisor population in flux.

To rise to the challenges, the nation’ s largest IBDs are transforming themselves into businesses with multiple affiliation models. Nowhere is that more evident than at LPL Financial, which now boasts a network of 28,000 advisors, dwarfing its rivals. It also enjoys an advantage as a public company with a market capitalization exceeding $ 20 billion. Its competitors will need to be nimble and clever to continue thriving.

What’ s ultimately important is that Americans who want and need financial advice are able to find it. Rasmussen explains that more IBDs are using their capital to acquire interests in affiliated firms whose principals are looking to cash out and retire. It’ s a bit like the hospital or HMO that buys out physicians’ practices. One of the broker-dealer industy’ s motivations, besides serving advisors, is to keep clients’ assets on their books.

How this all plays out with clients is a story that remains to be written.

Evan Simonoff

Email me at esimonoff @ famagazine. com with your opinion.

6 | FINANCIAL ADVISOR MAGAZINE | APRIL 2025 WWW. FA-MAG. COM