Displaying items by tag: brokerdealers

The last thing a retiring financial advisor might want to consider is making a significant change to their business. Their focus is often on finding the perfect partner to join their practice so they can transition out over the next few years. However, an overlooked option with significant benefits lies in switching broker-dealers.

Think of it as a reverse recruitment process. Just as firms entice top advisors with cutting-edge technology, competitive compensation, and career development opportunities, these same features can attract a larger pool of potential buyers for a practice. Joining a progressive firm can also expand an advisor's recruitment options, giving them access to a broader range of advisors who might be interested in taking over their business.

Making a switch might seem like extra work at the tail end of a career, but the advantages can be substantial. By aligning with a forward-thinking firm, an advisor may find a smoother transition to their succeeding partner and potentially even a higher purchase price for their practice. Advisors should not dismiss the power of changing broker-dealers as part of their succession plan – it could be the key to a successful and rewarding exit.

Finsum: Financial advisors planning their succession should explore how switching broker-dealers could be their ticket to a rewarding exit.

(Washington)

The SEC just put out a shot across the bow of brokerage firms as it regards Reg BI. Firms and industry attorneys have been expecting the SEC to ratchet up enforcement over the coming year as the agency starts to bring Biden’s priorities into reality. However, the SEC made it very clear this week, telling firms that it is not enough to tell reps what Reg BI says, but educate them with examples of how to meet Reg BI’s requirements. Investment News summarized the SEC’s comments this way, saying “Financial firms that are failing to comply with the broker standard of conduct aren’t aligning their internal controls to meet its requirements”. The SEC is now checking to see if firms have set up a robust Reg BI compliance program, and if not, they will be in hot water”. According to Corey Schuster, assistant director of Division of Enforcement’s asset management unit, “firms may want to consider: Have you done a deep dive on conflicts? … Have you examined your disclosures regarding conflicts? And is there a need to mitigate certain conflicts of interest?”.

FINSUM: The SEC is gearing up to drop the hammer on Reg BI enforcement, which has long been expected. However, the reality of heavier enforcement and the specifics of how it is executed are very different than seemingly far-off expectations.

(New York)

A lot of advisors have been going independent lately. Whether you are moving to start your own RIA or want to join a large independent broker-dealer network, there are a lot of intricacies involved with running your own shop. Before you even think about the logistics of moving, it is important to assess whether you have the skills to succeed. There are essentially three skills that one needs to become a successful independent advisor: operational experience, in-depth relationship management skills, and sales/business development acumen. Operationally, you will likely have a tight budget when first breaking away, so understanding the nuts and bolts of the business, like migrating client accounts, is critical. Secondly, you will need to be able to concisely define the nature and scope of your relationship with clients in order to keep them happy for the long-term. Finally, you will need to be able to convince people why they should manage your money (without the weight of a wirehouse brand behind you!).

FINSUM: As a companion to the above, Michael Kitces notes that most successful independent advisors had seven years experience before going it alone.

(New York)

After rumors circulating for weeks, Ladenburg and Advisor Group have jointly announced that they plan to merge. The new company will operate under the Advisor Group name and have over 11,000 advisors. None of the two companies nine broker-dealer subsidiaries will be merged, and advisors will continue their multi-party custody and clearing set up. The deal valued Ladenburg at $1.3 bn. One senior industry commentator said “It’s a very bold transaction that could create a major new player overnight that can go toe to toe with the other biggest firms in the independent space in terms of scale and resources”.

FINSUM: With margins so low across the IBD industry, scale is the only way to improve profitability. We expect the wave of deals to continue.

(New York)

If there was ever a stat that really represented the big changes underway in the wealth management industry, it is this one: a new survey shows that broker-dealers are earning more revenue from fees than they are commissions. That is a major shift for the group, who until recently existed mostly as commission engines. The stat also reflects the growing trend towards dually-registered B-D/RIAs, allowing advisors to perform both functions.

FINSUM: The regulatory trend and customer trend is moving towards fee-based payment. This stat reflects just how pervasive the model is becoming.