Are you a financial advisor trying to decide what type of firm to join? Or maybe you’re an investor trying to choose the right financial advisor?
Whichever group you fall into, you may have come across this question during your research: what is the difference between a wirehouse and an independent Registered Investment Advisor (RIA) or broker dealer?
There are significant differences between wirehouse firms and independent RIA/Broker Dealers for advisors and clients. Here, we’ve created an infographic to lay out the main differences so you can make an informed decision about your career, wealth management, and financial future.
What is a Wirehouse?
A wirehouse a term used to describe a full-service broker dealer. Modern-day wirehouses range from small regional brokerages to large financial institutions with global footprints.
What is an Independent Broker Dealer (IBD)?
A broker-dealer is a financial advisor or firm that buys and sells securities for its own account or on behalf of its customers.
What is an Independent RIA (Registered Investment Advisor)?
An independent registered investment advisor (RIA) is a financial expert who advises clients independently and is not affiliated with a broker-dealer. RIAs are required to act in the best interests of their clients.
RIA vs Broker Dealer: Is there a Difference?
A Registered Investment Advisor (RIA) focuses on long-term financial planning, while a broker-dealer focuses on short-term transactions. Both are financial service providers that can help investors.
Independence Over the Business Structure: Wirehouse vs. Broker Dealer & Wirehouse vs RIA:
In a wirehouse structure, financial advisors are considered employees of the firm. At independent broker dealers and RIAs, on the other hand, advisors are considered owners of their own advisory business. They have the freedom to independently establish their own location and client culture.
Freedom Over Client Portfolio
This difference applies to financial professionals more than clients: under a wirehouse structure, financial advisors are often limited to the types of clients they can work with based on size and revenue. Advisors’ payouts may also be denied if the client doesn’t meet a minimum threshold.
In an independent firm structure, advisors are free to choose which clients they work with. This freedom also includes full payout on all accounts of any size.
Product Offerings
Both wirehouses and banks often have proprietary products that financial planners and advisors are required to offer their clients. Particularly at banks, representatives are often incentivized to cross sell products, including mortgages, retirement plans, and life insurance.
Advisors who work at an independent RIA or broker dealer aren’t incentivized to recommend a particular product over another, and so have the freedom to recommend investment products based on their clients’ best interest.
Payouts
The payout potential for financial advisors at independent firms is much higher than that at wirehouse firms and banks. That’s because advisors at RIA’s and broker dealers can choose to have the firm cover their overhead costs or receive a higher payout by covering overhead themselves.
Broker Dealer Registration: How Advisors Can Successfully Join a Firm
To register with a Broker-Dealer, an advisor must pass required licensing exams (e.g., Series 7, Series 63) and be sponsored by the BD. They complete Form U4 for FINRA registration, undergo background checks, and get approval. Once registered, they must follow compliance rules, supervision, and ongoing education. Learn more in our guide on how to become an advisor.
Frequently Asked Questions
Below are some commonly asked questions to consider:
Is Alden Investment Group considered a Wirehouse, an RIA, or a Broker Dealer?
Alden Investment Group operates as a hybrid financial services firm, incorporating elements of an RIA (Registered Investment Advisor) and a Broker Dealer.
Unlike wirehouses which usually refer to large, traditional full-service brokerage firms such as Merrill Lynch or Morgan Stanley, Alden operates independently. This gives our financial advisors greater flexibility in product selection and client service models.
Are financial advisors leaving wirehouses to go to RIAs or Broker Dealers?
Yes, many financial advisors are leaving wirehouses in favor of RIA and hybrid RIA/broker dealer firms like Alden, a trend that has been accelerating in recent years.
The shift away from wirehouses toward independent RIAs and hybrid firms has been driven by better compensation, greater flexibility, and the ability to deliver more customized solutions for clients. Advisors looking for long-term growth and control over their careers are increasingly making the move.
The Rise of Hybrid RIA/Broker-Dealers
Many advisors transitioning from wirehouses prefer hybrid RIA/BDs (like Alden Investment Group) because they offer:
- Fee-based advisory services (like an RIA)
- Commission-based brokerage services (like a traditional broker-dealer)
- Access to alternative investments, insurance solutions, and capital markets
The Bottom Line
The shift away from wirehouses toward independent RIA and hybrid models is driven by better compensation, greater flexibility, and the ability to deliver more customized solutions for clients. Advisors looking for long-term growth and control over their careers are increasingly making the move.
