IBD Elite 2022: Which independent brokerages have the biggest RIAs?

The registered investment advisor units of independent brokerages have come to define businesses that were largely dependent on commission revenue just 15 years earlier.

Over that span, annual commissions grew by 42% to $12.7 billion, compared to advisory fees soaring by 559% to $20 billion, according to Financial Planning's annual IBD Elite study. Financial advisors, clients and wealth managers are each driving that long-term change to advisory services, which must place a customer's interest ahead of the firm's under the fiduciary duty, from brokerage accounts, where recommendations only have to be in their best interest. The 10 firms below are ranked by their share of business from advisory fees. Commonwealth Financial Network, Ameriprise and Northwestern Mutual are leading the shift.

That doesn't mean that any independent brokerages and the roughly 100,000 financial advisors they serve will be dropping their affiliations with broker-dealers anytime soon. Instead, companies like Rockville, Maryland-based XML Financial Group are using brokerages to support their RIAs with novel ties between the businesses, their parent firms and outside providers. XML is owned by Focus Financial Partners, but it has its own brokerage that chairman Brett Bernstein said the company uses in a fiduciary capacity for certain services that can't be done by an RIA. 

As examples, Bernstein cited legacy variable annuities that must be held on the brokerage side of the house, life insurance purchases, bond "ladders" that stagger their maturity date and 1031 exchanges for real estate asset trades that come with a tax break. The brokerage entity enabled XML to complete two acquisitions spanning a combined $1.7 billion in client assets over a 10-month period for practices that wouldn't have completed the deals if not for XML's broker-dealer, Bernstein said in an interview last month.

"Everything is led with the investment advisor, and the broker-dealer is secondary," he said of his firm's approach to fiduciary services. "We always act in that capacity. We always put our clients' interests first." 

For firms like XML and others in the list below, the future of their businesses depends on their ability to use brokerages as service centers to their RIAs rather than as the dominant components to their revenue. Otherwise, the continuing record growth of RIAs and competition from firms such as Focus will leave them in the dust. The dynamics add much more nuance to the industry's traditional dichotomy between brokerages and RIAs.

Scroll down the slideshow to see which independent brokerages earn the largest share of revenue from advisory fees. For a listing of the largest independent brokerages by overall revenue, click here. For a ranking of the firms with the largest proportion of female advisors in their ranks, follow this link. And, to read the IBD Elite cover story, "Brokerages are morphing, not going away," click here.

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Notes: The companies are ranked below by their percentage of 2021 revenue attributable to advisory fees, as reported by the companies themselves. FP relies on each firm to state its metrics accurately. The figures for advisory fees, commissions and any other types of revenue are rounded and may not add up exactly to the overall annual business of each firm.