TD Ameritrade Institutional

July 2020

Break Away To Independence Spring 2020 Survey

TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2020 TD Ameritrade.

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About the Survey

TD Ameritrade Institutional set out to understand what motivates financial professionals at full-service broker-dealers and independent broker-dealers to consider a move to the independent RIA channel.

From April to May 2020, 120 brokers who indicated they planned to go independent within two to three years -- referred to as ”potential breakaways” -- completed an online survey conducted by Escalent, on behalf of TD Ameritrade Institutional. Broker respondents were, on average, 50 years old and indicated they were handling roughly $100 million in client assets. Respondents averaged 20 years of experience, including 11 years with their current employer.

In addition, we surveyed 330 advisors who are already at an independent RIA. This group was, on average, 50 years old and managed $320 million in client assets. These respondents, on average, worked as financial advisors for 16 years and were with their current firm for 13 years.

The margin of error for this survey is +/- 5.8%.

This Spring 2020 Survey follows up on a similar survey conducted by Escalent, on behalf of TD Ameritrade Institutional, in Fall 2019 (referred herein as “the fall survey”)

TD Ameritrade Institutional and Escalent are separate and unaffiliated and not responsible for each other’s services and policies.

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Executive summaryMore potential breakaways explore joining an RIA, versus launching a new firm More brokers are open to joining an existing RIA firm (19% vs. 9% in Fall 2019) More brokers, 17%, would partner with a firm that provides technology vs. 7% six months ago. 25% want to launch their own firm, compared with 29% in the fall.

Potential breakaways are more confident, less worried about a move to RIA Fewer brokers worry that the transition will be too difficult (48% vs. 69% in the Fall) Fewer brokers, 47%, express concerns about legal/compliance issues vs. 60% in the Fall. Potential breakaways are confident they have the support of all their clients.

RIAs continue to endorse making the move to independence. 77% of RIAs say their quality of life is better 80% say the transition was easier than expected. 78% transitioned all the clients they wanted after becoming an RIA. 73% say removing their employer’s national brand helped the bottom line 72% say RIA technology is better than expected 66% say managing their own business is easier than they thought.

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Executive summary

Brokers continue to believe in the benefits of RIA independence. Greater control remains the primary driver for brokers considering a move to the RIA channel. 3 in 4 believe they’ll earn more as independent RIAs.

COVID-19 and market volatility added to the challenges that brokerages face. Around 1 in 3 prospective breakaways cite the COVID-19 pandemic and financial market turbulence as key challenges Concerns about regulations, pricing pressure and attracting new clients remain top-of-mind.

Not surprisingly, flights to independence were delayed – but not cancelled. 33% of prospective breakaways are likely to move in the next 12 months, down from 55% in the Fall 2019 survey. Still, 40% say they are more likely to break away than they were 6 months earlier

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Brokers: Current sentiment

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Brokers’ interest in the independent RIA model remains high

Less likely About the same More likely

Brokers’ likelihood of breaking away, compared with 6 months ago

15% 46% 40%

Q6B. How does your l ikelihood to break away compare to 6 months ago? Are you...? (Base: Potential Breakaways; n=120)

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What is your ideal path to becoming an Independent RIA?

Acquire or merge with another business

Start my own business

Join an existing firm as an employee

Partner with a company that provides technology and other support

39%

25%

19%

17%

BSM9. Which of the following is your ideal transition path to the Independent RIA channel? (Base: Potential Breakaways likely to move to the RIA channel; n=53)

vs. 48% in Fall 2019

vs. 9% in Fall 2019

More brokers are open to alternative paths to independence

vs. 7% in Fall 2019

vs. 29% in Fall 2019

Combined 36%

(vs. 16% in Fall 2019)

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Breakaways are confident they can succeed as RIAs

Perceptions about the independent RIA path are positive

Potential Breakaways Who Agree

I will make more money as an independent advisor 87%

I will be able to grow without a big national brand name 80%

Managing my own business won’t be too difficult 79%

I don’t worry that I will have to give up my securities licenses 72%

I don’t worry that my employer will sue me if I leave 70%

I don’t worry that I will have to give up my commissions-based income 59%

BSM1A. Which of the following is closer to your views? (Base: Potential Breakaways; n=120) BSM11. For each of the following statements on making a move to independence, please indicate whether you agree or disagree? (Base: Potential Breakaways; n=120)

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Brokers are confident clients are loyal to them as individuals.

Potential breakaways: My clients trust me

99%

My clients trust mycompany's brand

My clients trust mepersonally

BSM1A. Which of the following is closer to your views? (Base: Potential Breakaways; n=120)

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Why Potential Breakaways Delay Independence

I put my own plans on hold during periods of heightened market volatility or a market downturn 51% 55%

The transition to independence seems to be too difficult 48% 69%

Managing legal/compliance issues will be too difficult 47% 60%

My practice isn’t large enough to become an RIA 40% 56%

Potential Breakaways Who Agree

BSM11. For each of the following statements on making a move to independence, please indicate whether you agree or disagree? (Base: Potential Breakaways; n=120)

Meanwhile, many worries that hold back brokers have eased

Spring ‘20 Fall ‘19

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Brokers: Priorities and concerns

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36%

35%

14%

10%

5%

Brokers want greater control and potential to earn more

Top Reasons To Go Independent

Higher compensation

More control over my business

Freedom to work with clients how I want

Freedom to select investments that are best for my clients

Better quality of life

BSM6C. Which is the #1 reason causing you to move to the Independent/RIA channel? (Base: Potential Breakaways; n=120)

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Brokers expect they can earn more as RIAs

Expected RIA Compensation vs. Their Payout at Current Firm

Worse About the same Better

4% 22% 74%

BSM8B. Compared to your current employer, is the “payout” in the RIA channel…..? (Base: Potential Breakaways to RIA; n=53)

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BSM8A. Thinking about what you’ve heard about compensation in the Independent/RIA channel, please complete this sentence: Compensation in the RIA channel is generally equivalent to a “payout” of XXX% (Base: Potential Breakaways likely to move to the RIA channel; n=53)

Brokers expect they can earn more as RIAs

1% 7% 22% 22% 46% 2%

1% to 20% 21% to 40% 41% to 60% 61% to 80% 81% to 100% 100% or more

Compensation in the RIA Channel as a Percentage Payout

70%

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23% 26% 23% 15% 12% 1%

To move to independence now, my income would need to be…

My reason to break away is not financial More than 20% 20% more 15% more 10% more 5% more

50% (vs. 53% in Fall ‘19)

BSM7A. If you could be assured a certain level of income in your first year in the Independent/RIA channel, how much additional income would you need to make the move now? (Base: Potential Breakaways; n=120)

Many brokers would break away for a 15% increase

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28%

72%

BSM7B. Which of the following is more important to you? (Base: Potential Breakaways; n=120)

Breakaways are more committed to long-term goals than short-term gains.

Potential breakaways say they’re focused on the long run

Maximizing your current payout over the next 3-5 yearsBuilding long-term wealth and a sustainable business

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Biggest Dissatisfactions With Current Firm

Compensation

Leadership/strategic direction

Corporate culture

↑/↓ indicate significant difference versus Fall 2019 at 95% confidence levelBSM1. How satisfied are you with each of the following aspects at your current firm? (Base: Potential Breakaways; n=120)

29%

34%

28%

30%

26%

38%

41%

39%

35%

Not satisfied Somewhatsatisfied Satisfied

Brokers give their employers mixed reviews.

18BSM2. In your opinion, what are some of the most important challenges facing your employer? (Base: Potential Breakaways; n=120)BSM3. In your opinion, what are some of the most important challenges facing your practice? (Base: Potential Breakaways; n=120)

55%

40%

35%

32%

29%

28%

20%

19%

14%

12%

7%

Regulatory environment

Pricing pressure

Financial market outlook

Coronavirus pandemic [COVID-19]

Public trust in financial firms like ours

Aging client base

Consolidation/M&A activity

Increasing demand for fee based pricing

The Broker Protocol

Financial health of my employer

Other challenges

56%

37%

35%

23%

22%

21%

18%

9%

7%

1%

3%

Attracting new clients/increasing revenue

Aging clients could lead to withdrawals and net outflows

Coronavirus pandemic

Changing corporate culture

Public trust in financial firms like ours

Changing compensation structure

Our firm's technology is obsolete

Increasing demand for fee based pricing

More investors seek a fiduciary advisor relationship

New disruptive technology

Other challenges

Top Challenges Facing Their Employer Top Challenges Facing Their Practice

Regulation, pricing are stumbling blocks for brokerages

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Brokers: Breakaway plans on hold

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As in past periods of turbulence, breakaway plans are on hold

Likelihood of moving to a new firm in the next 12 months

30% 38% 33%

Less likely About the same More likely

Q6A. How likely are you to move to a new firm in the next 12 months? (Base: Potential Breakaways; n=120)

vs. 55% in Fall ‘19

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Attracting new clients/increasing revenue 56% 66%

Aging clients could lead to withdrawals and net outflows 37% 55%

Coronavirus pandemic 35% -

Changing corporate culture 23% 21%

Public trust in financial firms like ours 22% 18%

Top Challenges Facing PracticeTop Challenges Facing Current Firm

BSM2. In your opinion, what are some of the most important challenges facing your employer? (Base: Potential Breakaways; n=120) BSM3. In your opinion, what are some of the most important challenges facing your practice? (Base: Potential Breakaways; n=120)

Regulatory environment 55% 72%

Pricing pressure 40% 56%

Financial market outlook 35% 7%

Coronavirus pandemic 32% -

Public trust in financial firms like ours 29% 33%

Uncertainty spawned by COVID-19 and financial market turmoil joins top broker challenges.

Spring ‘20 Fall ‘19 Spring ‘20 Fall ‘19

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RIAs: Views on Independence

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Nearly 4 in 10 RIAs found their experience of transitioning to independence easier than anticipated.

Experience of becoming and independent RIA

Worse than expected About the same Easier than expected

7% 55% 39%

RIA3A. Reflecting on when you became an independent RIA, would you characterize your actual experience as...? (Base: RIAs; n=330)

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RIAs say moving to independence was a positive.

RIAs endorse benefits of going independent

We had no issues accessing investment products.

The transition to independent RIA was easier than imagined.

I transitioned all the clients I wanted to keep.

Losing the national brand was better for bottom line.

The technology is better than expected.

I had plenty of support from others in the industry.

Managing my own business was easier than anticipated.

I was able grow my business more quickly than expected.

Managing legal/compliance issues was not as difficult.

89%

80%

78%

73%

72%

69%

66%

59%

55%

RIA4A. Do you think each of the following statements is True or False? (Base: RIAs; n=330)

RIAs in Agreement

vs. 51% in Fall 2019

vs. 61% in Fall 2019

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Bottom line: The grass is greener for RIAs

Quality Of Life After Becoming An Independent RIA

Worse than before About the same Better than before

2% 21% 77%

RIA3B. How would you characterize your current quality of l ife? Is it…? (Base: RIAs; n=330)

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Appendix

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Survey Demographics

Broker who is likely to transition to independence in

the next 2-3 years

Potential Breakaway to Independent Channel

Average Tenure At Current Firm 11 yrs.

Average Tenure As An Advisor 20 yrs.

Average AUM $100M

Average Age 50 yrs.

Average Number Of Weekly Working

Hours44 hrs.

120

Discovered Current Firm Yourself (vs.

recruiter, friends etc.)30%

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Survey Demographics

RIA

Average Tenure At Current Firm 13 yrs.

Average Tenure As An Advisor 16 yrs.

Average Firm AUM $320M

Average Age 50 yrs.

330

Discovered Current Firm Yourself (vs.

recruiter, friends etc.)67%

Average Number Of Weekly Working

Hours42 hrs.

Advisor who already transitioned to the independent RIA channel – either

as an owner, partner or employee

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Important informationAbout TD Ameritrade Institutional

TD Ameritrade Institutional is a leading provider of comprehensive brokerage and custody services to more than 5,000 fee-based, independent registered investment advisors and their clients. Our advanced technology platform, coupled with personal support from our dedicated service teams, allows investment advisors to run their practices more efficiently and effectively while optimizing time with clients. TD Ameritrade Institutional is a division of TD Ameritrade, Inc., a brokeragesubsidiary of TD Ameritrade Holding Corporation.

About TD Ameritrade Holding Corporation

Millions of investors and independent registered investment advisors turn to TD Ameritrade’s (Nasdaq: AMTD) technology, people and education resources to help make investing and trading easier. Online or over the phone. In a branch or with an independent RIA. First-timer or sophisticated trader. Our clients want to take control, and we help them decide how -bringing Wall Street to Main Street for more than 40 years. An official sponsor of the National Football League for the 2016 season, TD Ameritrade has time and again been recognized as a leader in investment services. Visit TD Ameritrade's newsroom or amtd.com for more information.

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