What defines an Indy?

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May 8, 2008 10:14 pm

Okay.  I'm new.  And in search of a new place to work.  And while I'm looking I have heard the term independent.  Is it simply a "place" that does not have a in-house B/D?   Is there a defined definition?    Sometimes I feel dumb and happy... And sometimes I don't feel so happy!

May 9, 2008 9:22 am

To me "Indy" would mean independent RIA -meaning you set up your own firm, file your own ADV, set your own policies etc. You may or may not be associated with a brokerage.

May 9, 2008 11:03 am

Indy to me means that I own my own business, call most of the shots and keep much more of my commissions than my B/D.

May 9, 2008 12:32 pm

There are several but the main one for me is, I hire & fire my BD they do not hire me.

 
 
May 9, 2008 1:32 pm

When a B/D is just a firm the clears trades and provides some support to your firm for a fee.

May 9, 2008 3:29 pm

OK new guy here's the basics.  In this biz you can set up your business several different ways.  You've got to figure out the pros and cons of each and pick the one that's best for your personal situation.  It's not always about the money.  OK, a lot of the time it is, but not always. 

 
First, you can go what I would call the traditional route of working for a firm.  Merrill Lynch, Morgan Stanley, Edward Jones, Stifel Nickelhouse, etc.  You work for them.  Technically you are their employee, meaning they can fire you if you don't do what they want.  You get to offer your clients what your firm says you can offer.  You get in trouble if you go outside the box.  You get a payout of I'd say average of 40%.  They supply things like your office, computers, software, 401K, insurance, etc. 
 
Second is what you refer to as Independant.  That's where you decide that you want more freedom to do what you want with your business.  You decide what products and services to offer your clients.  You do things like payroll and taxes, obtain and pay for office space, hire an assistant, buy computers, software, and peripherals.  You do basically everything.  Some independant firms will offer benefits, back office support, etc.  Because the company you work through isn't doing much besides giving you a structure to place trades, you get to keep more of the money you earn.  The guys on here are better equipped to give you specifics, but I'd guess 75% or more is average.  The two big names, but not the only options, are LPL and Raymond James.  You indy guys can fill him in on the things I left out.  
 
There are a couple of different versions with some legal issues, like the RIA mentioned above.  But if you just want to know the basics, there you go.
May 9, 2008 5:07 pm

If the brokers are independent contractors instead of employees, it is an indy firm.

May 9, 2008 9:57 pm

Thank you for ALL of the info... For some reason I couldn't get a beat on the indy concept.

 
So then...
 
Wire House = Merril - Smith Barney - AG Edwards (wach.)?
B/D = LPL, Pershing, Raymond James?
Non-Indy = AXA - Prudential - Ed Jones - David Lerner - John Hancock?
Indy = Owner Operated Offices - Niche Offices - and such?
Banks are banks... PNC, Bank of America, WaMu?
 
I thing I have a handle on this... If not let me know.
 
Good weekend!
May 10, 2008 9:55 am

I'm letting you know that you don't have a handle on this.

May 10, 2008 1:30 pm

second the motion...

May 10, 2008 6:45 pm
NJ FA 2008:

Okay.  I'm new.  And in search of a new place to work.  And while I'm looking I have heard the term independent.  Is it simply a "place" that does not have a in-house B/D?   Is there a defined definition?    Sometimes I feel dumb and happy... And sometimes I don't feel so happy!


No - there is no agreed definition of the term independent.  Therein lies much of the source of confusion.  Following is a bit oversimplified but should help clarify.

If you are paid - in any part - by commissions you need to be a reg rep of a broker/dealer.  All wirehouses and big name firms you recognize are (or own) b/ds.    So are many so-called "independent" firms like LPL or Raymond James, Cambridge, etc.  The main practical distinction between the wires (to lump all non-independent b/ds together for purposes of this discussion) and the independents, as anon pointed out, is the legal relationship between the b/d and the reg rep: those working at the wirehouses are employees, while those at the independents are independent contractors.  In addition, the wirehouses provide office space, staff, equipment, etc. and because of that pay out roughly about half what the independents do (depending on production levels), but with the independents you are personally responsible for covering many of those expenses yourself. 

Wires also are more common places to start because you receive training and some nominal salary in the early days.  Independent b/ds and/or the independents affiliated with them seldom have any formal track for that, so it is more rare - but not unheard of - to start as a new new on the independent side.

So typically when you hear people talk about going independent in this industry they are referring to independent b/ds.

But that's not the whole story.  Some people choose to forego commission payments in favor of fees.  Those who do so have no need of any b/d at all, and become RIAs.  They are more independent that the independents, so to speak, as they keep 100% of the fees they earn and are responsible for 100% of their expenses and management decisions.  Part of the reason you hear less about them is they do not spend money like the independent b/ds do to advertise themselves to potential new reg reps. 

As if that's not enough, there is also the hybrid advisor who owns their RIA AND ALSO affiliates with a b/d for commission business.

Oversimplified, but generally there it is.  If you're new, you won't be likely to find many opportunities on the independent side, in whatever definition of independence you choose to use.  That generally works best for experienced advisors with an established book.

May 11, 2008 7:10 am

Good post, Morphius.  There are just so many permeatations (sp?).    For example, look at a Northwestern Mutual insurance agent.  They are employees with their Northwestern Mutual insurance business.  However, with their securities business, they use an independendent Broker Dealer.  With any business that they write outside of Northwestern Mutual, they are also independend contractors.  Yet, despite not being employees of their B/D, they can't go to the bathroom without permission of their B/D (not meant as any slight).

May 11, 2008 9:00 pm
anonymous:

I'm letting you know that you don't have a handle on this.

 
I'm perplexed by the amount of mystery in this business... Like the Indy, non-indy issue.  As I interview with places I am asking questions about compensation, health benefits, and marketing beliefs... And I get vague and foggy answers.  Q: What is your comp schedule?  A: Well, we are pretty much the same as _____, OR We are competitive as _____   Q: Do I pay 100% for Health Benefits, or does the company kick in?  A: Oh. Well. Um.  Our benefits person will answer that when she has you fill out the apps. 
 
I think these are pretty straight forward questions... That ANY person would want to know PRIOR to joining the firm.
 
Why the smoke and mirrors?
May 12, 2008 7:37 am

Part of the "mystery" is simply because this is a commission business.   Compounding this is the fact that one often has several sources of income that pays in a different manner.  New reps often have different commission schedules than experienced reps. 


The details are absolutely something that someone should know PRIOR to joining the firm, but it's not important until a job offer is on the table.  If there were things that you didn't know about simply because you didn't ask enough questions, then that is probably your fault.  If there were things that you didn't know about because a newby wouldn't have the requisite knowledge to even know to ask the question, then the fault lies with the firm.
 
What do you want in a firm?
May 12, 2008 8:37 pm
anonymous:
What do you want in a firm?
 
I'm just looking for a place that is fair on what I have to pay for out of pocket that is upfront and forthcoming.
 

A firm with an honest  & reputable name. 


 
A good training program, mentor program, or just a manger that gives a damn and is willing to show someone the ropes.
 
A huge book of business for me to pick up and run with!  (just kidding)
May 12, 2008 11:58 pm
NJ FA 2008:
anonymous:
What do you want in a firm?
 
I'm just looking for a place that is fair on what I have to pay for out of pocket that is upfront and forthcoming.
 

A firm with an honest  & reputable name. 


 
A good training program, mentor program, or just a manger that gives a damn and is willing to show someone the ropes.
 
A huge book of business for me to pick up and run with!  (just kidding)
 
I'm confused.  Didn't you learn anything about this business and other firms while you were at AXA?  I have known some very successful guys that started at AXA and left to start their own place.  What did they do that you didn't???
 
 
 
 
 
 
 
 
 
 
Clients and their money is my guess.