IBD Report Card
computer screens business data Wavebreakmedia Ltd/Wavebreak Media/Thinkstock

Editor's Letter: April 2017

The Future of Independent Broker/Dealers

In this issue is our annual Independent Broker/Dealer Report Card, where we ask registered representatives to rate their brokerage firms across a number of factors, including managerial support, technology, compliance capabilities and others.

The upshot: Most advisors are very satisfied with the brokerage firms they’ve chosen to affiliate with, and every year we’re left with the task of teasing out distinctions between responses that don’t vary by much.

One question that we didn’t ask, but likely should have: What do you think is the future of the independent broker/dealer model? My guess is most of the respondents would be optimistic, even though it seems as if the business model — largely spun out of the insurance industry in the middle of the last century — was considered by many decidedly transaction-based and sales-oriented. Regardless of what happens to the Department of Labor’s fiduciary rule, most believe that the old method of registered representatives selling investment products on commission is an unsustainable model.

How the brokerage firms adapt to the changing market will be an ongoing story in the industry for the foreseeable future. The advisors themselves on these platforms largely agree on the need to provide best-interest advice to their clients and seem to want to move toward an advisory platform. The question is, how quickly can the independent broker/dealers themselves adapt to satisfy the advisors?

They’ll need to move from platforms that facilitated the commission-based sale of investment products to ones that act more like the custodial firms in offering true fee-based advisors back-office support across the spectrum, including technology, compliance, shared financial planning tools and investment analysis.

The rise of the hybrid advisor, registered both with a Series 7 and with the SEC, is driving the change. Advisors themselves won’t be put into easily definable silos. And increasingly, those advisors will have their choice about where to conduct their business. It’s up to the firms to earn the advisors’ trust and loyalty. How they do that will be the defining story for IBDs for the next decade, at least.

The topic, incidentally, will be the focus of a panel discussion at our Industry Executive Forum and networking event on Oct. 11, where we’ll bring CEOs of the top IBDs together to discuss how they are adapting to the new world. This will take place during the afternoon before our annual Industry Awards dinner, where we get the chance to recognize some of those firms that are succeeding in helping advisors do their jobs better. Stay tuned for more information on all of that in the coming months.

David Armstrong


Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.