Is Bigger Better?

Is Bigger Better?

Little guys are having a harder time surviving in the IBD world.

Little guys are having a harder time surviving in the IBD world. Driven by the need for profitability, IBDs have been pruning low-producing brokers in growing numbers, according to “The Race for Top Talent II,” a new report by Pershing and FA Insight. The share of advisors with less than $100,000 in production fell from 75 percent in 2005 to 66 percent in 2009. The trend may boost the bottom line, but it may not be in the best interests of IBDs in the long run, the report says, since it creates a “heavy and unhealthy dependency” on recruiting from a shallower pool of advisors among their competitors. Penalty boxes on the compensation grid, among other disincentives, are pressing smaller producers to leave the business or join a different firm, according to the report. The total number of advisors in all channels has remained flat at about 310,000 over the last few years.

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