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While many of the IBDs have merged and gotten quite large through both organic and growth through acquisition, there are also many small, “boutique” broker dealers, usually with less than 500 representatives who are also doing very well. They have sound financials and have stayed away from many troublesome alternative investments that have put other firms out of business. Their service models are sometimes superior to the larger firms, offering more personalized service in a “family type” culture &Independent broker dealer.

Many times, we hear from our candidates that they “feel like they are a number” at their current firm. The smaller broker dealer’s culture is very appealing. Many of the smaller firms offer similar platforms and more “personal” support from the home office and are usually more flexible with terms of their agreements with the financial advisor joining the firm. In many cases, the first or second conversation that a prospective broker has with the firm is with the CEO or officers of the broker dealer. They want to speak to each candidate individually to get to know the advisor, before making a decision to hire them. The fact that the advisor can pick up the phone and contact the officers of the firm is sometimes the reason that an advisor chooses to join a smaller firm who can provide a “family type” of environment. It is appealing that the advisor is not a “rep number”- when they call into the small broker dealer, and they usually know him on a first name basis & Independent broker dealers.

In many cases, these smaller firms have the latitude to customize their offers to the FAs as their management structure is flat. Many of these broker dealers offer payouts without a “grid”. They offer high payouts, and in many cases lower costs, and lower production requirements than their larger counterparts. Many of these “boutique broker dealers” also specialize in certain types of business such as: fee-based, wealth management, financial planning, RIA “friendly”, commission equity business, packaged products, discretionary business, retirement plans, fixed income, options or alternative investments. The smaller broker dealers are not large enough to be “everything to everybody”. By specializing in certain types of business, the financial advisor may feel more of a synergy with a firm that is playing in the same “sand box” as he.

Most of the small broker dealers clear through a big well known clearing firm such as Pershing, National Financial, J.P. Morgan, RBC or First Clearing. The client’s assets are held safely at one of these clearing firms. If for some reason, the BD went out of business, or they decided to switch firms, they could simply find another BD on that clearing platform or switch to another clearing firm, to continue their business. Broker dealers are more interchangeable in the advisor’s mind, when they switch to another broker dealer within the clearing firm & Changing broker dealers.

We will continue to see a good movement of financial advisors to the independent space. From what we can see, IBDs as well as the SIBDs will continue to benefit from revenue growth with higher growth rates within the SIBD space. The IBDs are here for the long Term. Article written By Shawn W. Smith.

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