Filed Under:Life Insurance, Life Planning Strategies

Three-quarters of fee-based advisors use index funds

Over half of fee-based financial advisors have invested more than 30% of clients’ assets in mutual funds and three-quarters of these advisors use index funds, according to new research.

Tiburon Strategic Advisors, Tiburon, Calif., published this in a summary of results from its survey, “Markets & Distribution Channels: Growth in the Self-Serve, Independent Advisors, & International Markets.” The report explores markets & distribution channels through which financial services products & services are delivered, including the self-serve, financial advisor, institutional, and international channels.

Institutional separate account managers have $8.0 trillion assets under management, up nearly 40% since 2005, the report observes. U.S. hedge fund assets under management have grown significantly to almost $2 trillion, up nearly 500% since 2000 but flat since 2006

Nearly half of fee-based financial advisors surveyed by Tiburon say that getting custodian referrals is the least important criteria when selecting a custodian. Also, more than three-quarters of fee-based financial advisors that earn less than 75% of their revenue from fees use Fidelity Investments.

The report adds almost one-quarter of brokers have changed firms in recent years. And about half of financial advisors move to another wirehouse. Almost two-thirds of independent reps are affiliated with one of the larger independent broker/dealers

The independent broker/dealer market is comprised of mostly smaller firms, the report states. Only 15% of independent broker/dealers have more than 100 reps

Among the survey’s additional findings:

  • There are 147,863 independent broker/dealer reps, up 4,000 since 2001
  • Independent broker/dealers generate $11.1 billion revenues, up over 35% since 2001
  • Two-thirds of independent reps would like to generate at least three-quarters of their revenues from fee-accounts within five years
  • More than three-quarters of independent reps believe that a service mentality, strong ethics, and determination are the most critical personality traits for success in the financial planning business
  • LPL is the leading independent broker/dealer in terms of the number of corporate office employees, with nearly three-to-nine times as many employees as the other top firms, although a few like Raymond James may be less comparable.

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Nichole Morford

Nichole Morford
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