Revenue generation at corporate and independent RIAs is comparable, but independent RIAs need to ensure they have appropriate scale to be profitable, a new study recommends.

The study, commissioned by NFP Advisor Services Group and carried out by Aite Group, says that revenue for advisors with a corporate RIA averages $1.2 million, compared with $1.3 million at an independent RIA.

In terms of profitability, independent RIAs need more than $200 million assets under management to be profitable, as long as business operations and expenses are managed efficiently. The tipping point can be higher in cases where business process and technology expertise is lacking, NFP said.

Advisor income favors corporate RIAs, with advisors attached to corporates earning more on their books of business, particularly in the $100 million - $1 billion asset segment, the study found.

Another drawback of the independent model, the study found, was that it means more time and resources are spent on compliance, technology and other operational aspects of the business, meaning less time can be spent on prospecting and sales or client work.  

However, an increasing number of service providers are innovating in the outsourcing market when it comes to wealth management technology, as well as other aspects of the platform, which could see these differences erode over time.

What’s more, the right model will depend on the goal of the advisor and the mix and size of his or her book of business.

"NFP strongly believes that both the corporate and independent models can provide the right solution for an advisor,” said James Poer, president of NFP Advisor Services Group.

“However, it is critical for advisors to understand the distinctions between the structures, and consider their personal preferences and priorities so they can make the best decisions for long-term success," he added. 

In related news, United Capital has just release an interactive tool for advisors which is aimed at helping them understand which career path in the advisory industry suits them: their current arrangement, a lateral move, establishing their own RIA or joining a national partnership.

Aite Group's study, The RIA Tipping Point: Corporate or Independent, was based on a survey of 161 financial advisors, evenly split between those affiliated with a corporate or independent RIA.