Affiliating with the broker-dealer that best matches a financial adviser's practice can help bring a business to the next level, and make getting there a lot easier, too.
Broker-dealers are far from “one size fits all,” yet I have found that many advisers, even those who are satisfied with their broker-dealer, don't realize that there may be a broker-dealer out there that aligns perfectly with their business and that may be a better match culturally.
When advisers ask, “Who are the "best' broker-dealers?” my response is that it isn't about who is best but rather about who the best match is for their business.
With thousands of broker-dealers out there, it's no wonder that many advisers don't know the full extent of their options. Although it is the advisers' job to provide the best service and products to their clients, it is our job to be intimately familiar with the broker-dealer universe and its wealth of different specialties, sectors and niches that can help advisers build their business.
Following are a few examples:
Alternative investments. Re- cently, and in past years, we have seen broker-dealers go out of business as a result of regulatory violations involving alternative investment products that were either fraudulent or that went bad. It is more important than ever for advisers who offer alternatives to evaluate how their broker-dealer handles these products, as many have pulled back on which companies and on how much of certain products they allow their advisers to sell. Joining a firm that understands the role of alternatives and focuses on due diligence can help advisers offer appropriate products while also keeping them safe from regulatory trouble. There are still broker-dealers out there that specialize in providing alternatives and that haven't had regulatory troubles.
Advisory hybrid focus. Broker-dealers that offer a hybrid option for their advisers have an increasingly popular value proposition (see “Hybrid offers best of both worlds,” InvestmentNews, Nov. 18). Becoming a hybrid adviser allows advisers to maintain their securities license to transact commission-based business through the brokerage firm, while also operating under a fee-based model as their own registered investment adviser. Firms that offer a hybrid platform have many options, including built-in technology, costs that take advantage of economies of scale, a broad universe of product offerings, and support in areas of compliance and practice management, as well as the multiple revenue sources afforded to RIAs maintaining a broker-dealer relationship.
Low-cost provider. For advisers who conduct smaller amounts of securities business as a supplement to another business, such as an insurance or certified public accountant practice, a provider that offers a platform with lower fees may be a cost-efficient option, offering just enough support to make the affiliation worthwhile.
Retirement marketplace. Broker- dealers that specialize in retirement offer education, technical support, access to employer groups and/or informational resources specific to 403(b) or other specialized retirement-planning services. Finding a firm that keeps up with the latest products and provides sales ideas, as well as marketing and compliance support, can help advisers to stay on top of a changing marketplace while building their practice.
Although not every broker-dealer is focused on a specific niche, I have found that advisers with a targeted audience or specific needs are best served by aligning with a firm that not only understands their business but that can help position their practice to bring it to the next level. In fact, I often hear from advisers who once felt held back by their broker-dealer and have since built their business to new heights by joining a firm that is a better match and that could help unleash their potential.
With thousands of broker-dealers out there, odds are, there is one that aligns with each adviser's practice.
Jodie Papike (email@example.com) is executive vice president of Cross-Search, an independent-broker-dealer adviser and executive placement firm.