Compliance costs cap New York indie B-D

tYet another independent broker-dealer is closing shop, this time due to the burden of compliance and regulatory costs.
Ensemble Financial Services Inc., will shut down soon, confirmed officials for the firm. Meanwhile, its 85 registered representatives are in the process of moving to Invest Financial Corp., one of the broker-dealers owned by Jackson National Life Insurance Co. (View a profile of Invest Financial, which has more than 1,200 reps, here.)
While Ensemble’s independent-broker-dealer business is shutting down, the registered investment advisory unit, Tompkins Financial Advisors, will remain open. said Tom Rogers, president of Ensemble Financial. The RIA is home to about 35 advisers.
“Running an independent broker-dealer is more challenging. It’s very difficult to be a small independent broker-dealer these days,” said Mr. Rogers.
A prime concern at Ensemble was performing “high quality” compliance in the face of increasing costs to do so, said Mr. Rogers, who declined to state the assets under management that Ensemble’s brokers controlled. According to Securities and Exchange Commission filings, Tompkins Financial Advisors manages $580 million in client assets.
Other large broker-dealers owned by insurance companies have benefited from the recent carnage created by small to midsize broker-dealers folding. When QA3 Financial Corp. said it was closing this month, due to mounting legal costs, FSC Securities Corp. — owned by American International Group Inc. — scooped a sizeable number of the firm’s reps. Specifically. FSC picked up about 50 QA3 reps and advisers who produce $7 million annually in fees and commissions. (For more, view “The big winners in the QA3 sweepstakes.)
Smaller broker-dealers are facing a host of cost pressures right now, including regulatory reform and net capital issues, said Steve Dowden, president and chief executive of Invest Financial. Invest “continues to see firms that don’t have the scalability,” or size and bulk, to deal with those pressures, he said. (Invest currently ranks as the 27th largest independent broker-dealer in the InvestmentNews B-D Data Center.)
According to its most recent filings with the Securities and Exchange Commission, Ensemble Financial, which is based in Pittsford, N.Y., generated $7.3 million in revenue in 2009.