Independence vs. Captivity

The Crossroads of Choice in the Financial Advisory Landscape

Legend has it that in the quaint town of Middlefield, an old, ornate signpost once stood at a fork in the road, guiding travelers with its timeless wisdom. One path veered right, winding through lush, untamed wilderness, symbolizing freedom and the unknown. The other turned left, leading down a narrow, well-paved lane bordered by high, predictable fences. Like the travelers of Middlefield, today’s financial advisors face a similar junction in their professional journeys: the decision between striking out independently or remaining under the umbrella of a broker-dealer.

Image of a financial advisor standing at a crossroad.

This pivotal choice is more than just a career decision; it’s a defining moment that can influence your professional autonomy, financial success, and client relationships. This decision has become increasingly significant with the rapid evolution of the financial advisory landscape. Let’s explore the implications of each path, supported by the latest data and statistics, to understand the real opportunities for today’s financial professionals.

The Path to Independence

Choosing independence is akin to taking the road less traveled. It offers autonomy and flexibility rarely matched in the traditional broker-dealer model. As an Independent financial advisor (IFA), you can operate your business, make autonomous decisions, and select the products and services that best meet your clients’ needs without the influence of a larger corporate agenda.

The numbers reflect the appeal of this path. According to a report by Cerulli Associates, independent channels have been growing remarkably, with assets under management (AUM) in the independent sector and projects that by 2027, independent and hybrid RIAs will control one-third of the intermediary market. This growth trajectory suggests a strong preference for independence among advisors and their clients, who often seek more personalized and unbiased financial advice.

Many advisors moving to independence harness the power of relationships with back-office solutions providers such as FocusPoint Solutions. One of the primary motivations behind the establishment of FocusPoint Solutions more than two decades ago was to assist advisory firms in retaining control over their practices, offering support, and safeguarding their unique brand identities. With the backing of the FocusPoint team, our advisors can transition to independence, uphold their individual cultures and shape their own futures.

The Broker-Dealer Route

Conversely, aligning with a broker-dealer offers a structured path with substantial support systems, including compliance, technology, and operational backing. For new advisors or those who prefer to focus solely on client management without the additional responsibilities of running a business, this can significantly lower the barriers to entry.

However, this route comes with its costs. Advisors in captive environments often face restrictions on the types of products they can offer, potentially limiting their ability to tailor solutions to their client’s unique needs. The 2021 Fidelity Insights on Independence study found that advisors considering a move to independence cited “increased flexibility in product offerings” as a key motivator.

The Financial Implications

Financially, the choice between independence and captivity can have long-term effects on an advisor’s earnings potential. While independent advisors may face upfront costs and ongoing operational expenses, their potential for higher long-term earnings is considerable. A report by Schwab Advisor Services highlights that independent advisors typically retain 80-90% of their revenue, compared to 40-60% in traditional broker-dealer relationships.

Moreover, the trend towards independence is supported by shifts in consumer behavior. Clients increasingly favor advisors who offer transparent, client-first services free from the conflicts of interest that can arise in a broker-dealer context. Independence allows financial advisors to swiftly adapt, stay nimble, and make decisions without bureaucratic delays, enhancing their ability to serve clients effectively in the rapidly changing environment. 

As we stand at this metaphorical fork in the road, financial advisors must consider their long-term professional goals, personal values, and clients’ needs. Whether choosing the freedom of independence or the support of a broker-dealer, the decision must align with the advisor’s vision for their practice and their commitment to serving their clients’ best interests.

Like the signpost in Middlefield, the choice between independence and captivity is significant, with each path offering different rewards and challenges. As the financial advisory landscape evolves, advisors are encouraged to weigh these options carefully, ensuring their chosen path fulfills their professional aspirations and the best outcomes for their clients.

FocusPoint Solutions empowers advisory firms by enabling them to maintain ownership of their technology, data, and, crucially, their client relationships. We provide comprehensive support by outsourcing non-revenue generating functions such as back-office operations, middle-office support, trading, reporting, and billing.

Yet, our commitment extends beyond these services. Another fundamental aspect of our company is our dedication to aiding advisors in growing their practices as an ongoing component of our partnership. Our team collaborates with advisors, providing expertise in executing marketing and sales strategies, harnessing technology, establishing strong brand identities, facilitating succession planning, navigating merger and acquisition opportunities, managing human capital, and more. We stand as your steadfast allies throughout the entire journey toward sustainable growth.


Here are a few sources that provide additional foundational data and insights that can help you understand the shifting dynamics within the financial advisory industry, particularly the growing appeal of the independent advisor model.

  1. Cerulli Associates Research: A series of reports by Cerulli Associates provide a comprehensive look at the financial advisory landscape, covering trends in asset management, growth rates, and advisor preferences across different channels. These reports discuss the significant growth in the independent advisor sector and compare it to the slower growth in traditional broker-dealer channels. For more detailed insights, refer to the Cerulli U.S. Advisor Edition and other publications on their website.
  2. Fidelity Insights – Top 5 Reasons to Go Independent (2022): This study reveals key motivations for advisors considering independence, including the desire for greater product flexibility. 
  3. Schwab Advisor Services – Exploring independence An overview of the Registered Investment Advisor model: This report discusses the financial aspects of being an independent advisor, including revenue retention rates, which are significantly higher for independent advisors than those in traditional broker-dealer environments. 


1. What are the main advantages of becoming an independent financial advisor?

Answer: The main advantages of becoming an independent financial advisor include greater autonomy over business decisions, offering a more comprehensive array of products and services that best meet client needs, and typically higher revenue retention rates. Independent advisors can build their brand and business model without the constraints imposed by a broker-dealer’s policies and priorities.

2. What support systems do broker-dealers provide to their affiliated financial advisors?

Answer: Broker-dealers provide substantial support to their affiliated financial advisors, including compliance oversight, access to established technology platforms, operational support, and often marketing and training resources. This support can reduce advisors’ administrative burden, allowing them to focus more on client service and less on business operations.

3. Why are assets under management (AUM) growing faster in the independent sector compared to the broker-dealer channel?

Answer: Assets under management are growing faster in the independent sector because of the personalized service independent advisors can offer, which appeals to clients seeking tailored financial advice. The flexibility to choose products without a broker-dealer’s restrictions helps advisors align with client interests, fostering trust and potentially better financial outcomes​​.

4. How do revenue retention rates compare between independent advisors and those affiliated with broker-dealers?

Answer: Independent financial advisors typically retain 80-90% of their revenue, whereas those affiliated with broker-dealers might retain only about 40-60%. This difference is largely due to the spreads, markups, fees, and commissions broker-dealers charge for the services and support they provide​​.

5. What motivates financial advisors to consider moving from a broker-dealer to an independent model?

Answer: Key motivations for moving towards an independent model include greater control over business practices and client relationships, dissatisfaction with broker-dealer constraints, and the potential for higher income. 

Another significant motivating factor driving the preference for independence is the constant flux of mergers and acquisitions (M&A) in the financial industry. These transactions often involve the integration of vastly different corporate cultures, which can lead to substantial disruptions and transformations. Unfortunately, these changes are frequently not in advisors’ or clients’ best interest. The drive to ‘make the deal work’ can result in massive shifts in company structure, priorities, and operational procedures, undermining the stability and consistency that advisors and their clients rely on.

Advisors also cite the need for a more transparent business model that aligns closely with client interests as a significant factor​​.

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