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Fidelity IWS, for example, takes no haircut on money market sweep accounts, and the client gets all the revenue — which can be attractive to anyone wanting to offer clients the possibility of having more financial resources in their pockets.

The transition to going RIA and using custodians like Schwab/IWS is often done for fiduciary reasons. Motives include greater transparency and better pricing for clients (such as no ticket charges on stocks/ETFs and no markups/platform fees); in other words, advisors have fewer conflicts of interest and more choices.

In contrast, BD/RIAs may lack these qualities unless they’re open to dual clearing without platform fees for holding advisory assets at outside custodians. The overwhelming selling point to some custodians is brand recognition. Clients see commercials or branches with these custodian brands, while clearing firm names generally ring hollow in my view.

2. Technology

One RIA told me they think the technology experience offered by the large custodians is much better because it’s designed with the end user in mind; clearing firms design technology for the independent broker-dealer/RIA.

Paperwork at the major custodial firms is generally shorter and easier to track and understand than clearing-firm paperwork. Schwab and IWS enable advisors to do everything on a tablet. These firms also offer better client experiences when it comes to their statements and websites, which has been communicated to us by advisors that have gone RIA.

Independent RIAs are also big on outsourcing technology, while some BD/RIAs prefer proprietary technology. Outsourcing technology has been a huge cost-saver for our industry, resulting in greatly increased efficiencies.

Developing your own technology is not only time-consuming but immensely expensive, though you can tout your ability to customize technology for advisors by going proprietary. Since the industry is full of independent tech companies solely focused on this one area and constantly introducing innovations, it doesn’t seem beneficial to reinvent the same technology in house.

What we have seen as one technology sweet spot in the industry is when independent BD/RIAs allow their advisors to work directly with any tech vendor. This lets advisors easily get tech upgrades, and the advisor owns the client data.

Another technology feature that a BD/RIA needs is a well-developed portal for communication between technologies. Many BD/RIAs choose specific technology that advisors are essentially stuck with and that doesn’t allow advisors to own client data.

Technology changes often and quickly, so firms want to be able to adapt fast to technologies that can bring greater efficiencies. The agnostic technology approach that allows advisors to use any tech assures that they are on the cutting edge. Proprietary technology can limit them from having access to the best the market has to offer in real time.

3. Compliance

One of the primary motives for becoming an RIA is to get away from Financial Industry Regulatory Authority restrictions. When going to the RIA model, you gain optimum flexibility in how you market yourself, for instance.

We worked with an advisor moving to the RIA channel who wanted to invest his own money and clients’ money in venture capital investments. The advisor was based in Silicon Valley, an active market for venture capital among tech companies, and most of his clients were tech executives. With a Series 7 securities license, he found his ability to work in the VC space incredibly difficult and bureaucratic, so he dropped it.

Compliance that caters to the lowest denominator originating with FINRA is moot. Some broker-dealers go so far as to add more to the compliance equation than what FINRA requires.

The chief compliance officer for an independent broker-dealer recently told me that, in the past, FINRA had requested advisory information on advisors, and the broker-dealer could refuse such a request because FINRA was stepping out of its jurisdiction. In other words, this type of request fell under the Securities and Exchange Commission’s authority.

With FINRA in charge of oversight tied to Regulation Best Interest, it is now able to demand advisory information from broker-dealer compliance departments. This new FINRA intrusion is likely to add fuel to advisors joining independent RIAs to further distance themselves from RIAs that own broker-dealers.

Independent RIAs also are more capital efficient because their compliance expenses tend to be substantially less than that of RIAs tied to broker-dealers.

The same CCO expressed frustration that although 80% of the BD revenue comes from advisory assets, 80% of the firm’s overall compliance budget goes to meeting FINRA compliance requirements; this effort often includes hiring additional staffing, lots of tracking and numerous procedures, not to mention the immensely higher litigation risks associated with commission products like variable annuities and alternative investments.

Whether you’re an RIA, broker-dealer/RIA or a broker-dealer, we don’t see one structure as cooler than the other. Rather, it’s a matter of trade-offs and what best satisfies client needs. Each model offers benefits and downsides. That said, independent RIAs with no ties to a broker-dealer appear to be gaining in appeal due to FINRA’s increasingly heavy-handed approach.

Jon Henschen is president of the recruiting firm Henschen & Associates, a firm that helps advisors find broker-dealer relationships.