Independent Advisors Switching Firms


More recently, as some of the independent firms are getting larger (1000’s of representatives) we are seeing more advisors considering leaving the larger independent firms for smaller independent broker dealers. We are hearing that the financial advisors aren’t getting good service from some of the larger firms that have not adequately added staff to support their advisors.  The ratio of back office support to the financial advisor may  fall, with high growth and the level of service from the back office support staff will drop, executives in the home office can’t be reached or don’t return calls.  In short, the financial advisor sometimes does not feel like a valued part of the organization, when in fact they are the “customers” of the broker dealer. A financial advisor of a larger broker dealer, recently mentioned to us that the people in his home office were getting more confrontational and treat him like he is a “subordinate”.  He further mentioned that he should be getting “Ritz Carlton” white glove service since he is buttering their bread”.  We are hearing more of these types of statements as reasons why some financial advisors desire to join smaller broker dealers.  Their arguments are that the smaller firms are either more specialized for their practice; they want more personalized service, lower expenses, higher payout by having direct home office compliance, ownership, they want a “family culture”, or lower production requirements.   In short, they want to feel like they are a customer of the broker dealer, and a valued member of the organization.


Small Broker Dealer Value Proposition


While many of the independent broker dealers have merged and gotten quite large through both organic and growth through acquisition, some of these firms now have 1000’s of advisors; 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.


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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 owner or 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 in many cases they know him on a first name basis.


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, financial planning, RIA “friendly”, commission equity business, packaged products, discretionary business, retirement plans, fixed income,  options business 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.