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Join an Independent Broker Dealer 

Leaving the pack? It's about time 

Financial advisors who want to change firms, usually don't have the time, contacts, or expertise, to have numerous discussions with many broker dealers. Your decision to find your next broker dealer is an important one. You will want your next broker dealer to fit your practice, and that's where we add value-in sorting through the maze of the firms and identifying the ones to fit your needs.

 

We work closely with many broker dealers, where we know the key decision makers well. We will familiarize you with these firms so that you can understand their culture, products, platforms, and introduce you to their key executives. We will act as your consultant to negotiate the best deal possible. We are with you every step of the way.

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Why?

Why advisors opt for independence

There are a number of reasons why advisors consider independence. Perhaps the most common is frustration with the status quo and a desire to conduct business in a way that differs from their employer. In other words, they believe they can do things better on their own.

 

If you're an entrepreneurial advisor, independence gives you control, customization, and creativity to run your business with freedom. Advisors are looking to grow their business and passionate about providing customized solutions to individuals and families. Many advisors breakaway to have the ability to offer their clients several different fee structures based on the scope of work they desire; This means the advisor is in charge of the business model, culture, location, and other aspects. Unlike a wirehouse advisor, there is a considerable amount of flexibility in the offerings and pricing structure that fall under an independent advisor category.

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The individual must be a good entrepreneur, manager and technician. A good entrepreneur will see the big picture and set the company goals. A good manager will take the big picture and condense it into several smaller steps. A good technician will execute the smaller steps to achieve the larger goals.

 

All independent advisors have a greater level of freedom than a wirehouse or bank advisor. However, an independent broker will still have to contend with his broker-dealer’s compliance department. An RIA will handle all compliance matters internally (unless it is outsourced). In fact, an RIA who is a sole practitioner will often be required to wear multiple hats, including that of a compliance officer. Even though an RIA has the greatest level of freedom, he also has more responsibilities. For example, becoming an RIA is tantamount to opening a store and having to make all decisions pertaining to the business. This includes deciding what products to offer, what price to charge, maintaining proper records, etc. Obviously both must comply with all applicable laws and regulations.

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Top 10 Reasons Why An Advisor Leaves His Current Broker Dealer:

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1. Higher Payout
2. Better Technology
3. Lack of back office support
4. More Compliance Flexibility
5. Don't Want to Sell Proprietary Products
6. Lower Monthly Fees
7. E&O Insurance is Too High
8. Want Access to Better Wealth Management Platforms
9. Lower Production Minimums
10. Feel They are Getting "Nickled and Dimed" by Hidden Fees

Option 1

Independent Broker or Registered Rep

Broker-dealers, on the other hand, charge a commission for each transaction. FINRA is responsible for regulating broker-dealers under the suitability standard, requiring each investment to be suitable for the investor at the time of purchase. Independent broker-dealers act as full-service brokerage firms but do not have many larger firms' strains and restrictions. An independent advisor has the same licensing requirements as a wirehouse advisor. Independent advisors work for advisory firms such as LPL Financial, Raymond James financial services, commonwealth financial network, and Ameriprise in a manner very similar to a self-employed independent contractor. Independent advisors have greater freedom over whom they take on as clients and how they do business with them. An independent advisor is, as the name implies, independently operated. 

 

A broker is compensated by commissions. An RIA charges a fee for advice. Moreover, as an independent, a broker should expect to receive 75% to 95% of all commissions generated.

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A member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance and any other information the customer may disclose to the member or associated person in connection with such recommendation.

 

Applicable regulatory authority and qualifications. Brokers are regulated by FINRA, Brokers must obtain (or maintain) a Series 7 (general securities registered representative license) and a Series 63 (state exam).

 

To illustrate, a broker could make a recommendation based solely on which product pays the highest commission and still be within the legal standard, as long as the investment is suitable for the client

 

Brokers are not obligated to disclose how they are compensated, any past disciplinary actions or conflicts of interest, although clients can find that information on FINRA’s BrokerCheck.

Option 2

Registered Investment Advisor (RIA)

According to Cerulli, RIA's are not only the fastest-growing segment of advisors for the last several years; it has been the only consistently growing segment as well. Pure RIAs are firms that have no affiliation with any broker-dealer. RIA's are regulated directly by the Securities and Exchange Commission. They are considered acting in a fiduciary capacity and so held to a higher standard of conduct than registered Representatives. This fiduciary standard mandates that an RIA always puts the client's best interest ahead of their own. Some RIAs charge clients a percentage of their assets under management what others charge either an hourly or flat fee for dispensing advice. Advisors in this model must obtain their series 65 license, which offers flexibility to run their business and manage accounts however they choose: flexibility to utilize multiple custodians, flexibility to establish their fee structure, flexibility in the way they market to clients and prospects, and finally flexibility and freedom in working with the regulators and compliance departments since FINRA and your B/D isn't responsible for supervising your RIA; except for Hybrids. 

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Fiduciary Standard: A person operating as a fiduciary, when making decisions for a client, must place the interests of the client ahead of his own at all times.

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An RIA will receive 100% of the fee paid by the client. There are some nuances that could slightly alter these percentages.

 

RIAs are overseen by the SEC (if AUM is greater than $100 million) or their individual state. RIA's must pass a Series 65 exam, although in some states, certain designations are accepted in lieu of the exam, including CFP, CFA, CIC, ChFC and PFS.

Option 3

Hybrid Advisor

A Hybrid Advisor is a representative of both an RIA entity and a broker or dealer. Hybrid RIAs are independently registered firms owned and managed by Hybrid Advisors. A Hybrid advisor is a person who maintains their securities license to sell commission-based products and also has their own personal RIA, which they use for managing money on a fee basis as a fiduciary. Historically most registered reps would use their Broker/Dealer's (B/D's) RIA. Now there is an increasingly popular trend of advisors "breaking away" from the B/D and using their own RIA, especially among the Independent B/Ds. They have some percentage of their business in managed money (advisory) and some in transactions (commissions). A "hybrid" model has supervised persons of the RIA registered as investment adviser representatives of the RIA and are also registered representatives of an unaffiliated broker-dealer. This allows reps to have clients in both places. 

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Today, a hybrid advisor can act as a broker or an RIA, charging a commission (as a broker) or a fee (as an RIA). In addition to the regular account paperwork, if the advisor is engaged as an RIA, the client must sign an advisory agreement that provides the details of the arrangement

Large RIA Aggregator

Many ex-wirehouse advisors thrive in this model. Advisors that focus on the fiduciary standard and running a primarily fee-only wealth management practice. These advisers often don't possess experience operating a stand-alone business in the independent Channel. They are not ready to form their independent registered investment advisory firm and be fully responsible for running it. Some of the RIAA aggregators are Dynasty Financial Partners, Focus Financial Partners, Commonwealth Financial Network, LPL Financial, and Hightower advisors. 

Top 25 Independent Broker Dealers of 2021 by Advisor Count

  1. Edward Jones • 17,500

  2. LPL Financial LLC • 16,109

  3. Lincoln Financial Network • 8,641

  4. Northwestern Mutual Investment Services • 7,766

  5. Ameriprise Financial Services, LLC • 7,755

  6. MML Investors Services, LLC • 7,316

  7. Raymond James Financial Services Inc. • 6,433

  8. Royal Alliance Associates Inc. • 5,799

  9. Equitable Advisors, LLC • 4,757

  10. Cambridge Investment Research Inc. • 4,155

  11. Avantax Investment Services, Inc. • 3,593

  12. Transamerica Financial Advisors, Inc. • 3,450

  13. Cetera Advisor Networks • 2,866

  14. Securities America Inc. • 2,600

  15. SagePoint Financial Inc. • 2,365

  16. Commonwealth Equity Services, LLC dba-Commonwealth Financial Network • 2,258

  17. Woodbury Financial Services • 2,054

  18. Park Avenue Securities LLC • 2,016

  19. Kestra Financial, Inc 1,943

  20. Cetera Financial Institutions • 1,905

  21. Principal Securities, Inc. • 1,782

  22. Voya Financial Advisors Inc. • 1,717

  23. FSC Securities Corp. • 1,579

  24. Lincoln Investment Planning, LLC • 1,440

  25. Waddell & Reed Financial Advisors

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