This is the fourth year the staff of REP. magazine has put together the Independent Broker/Dealer Report Card. We surveyed a total of 2,649 advisors across 22 brokerages to get their views on the industry and what they think about the firms they work with.
In the financial services world, it’s increasingly apparent that the firms need good advisors more than the advisors need the firms. That’s particularly true in the case of independents, and most of the IBDs on our list have worked hard to put in place programs and platforms that earn high praise from their brokers. Even the lowest-scoring brokers in this survey are still getting satisfaction rates above seven (on a 10-point scale). As the power in financial services continues to roll downwards toward the individual retail advisor, firms across the board are increasingly going above and beyond to win advisors’ approval. 
Two things struck me coming out of this year’s survey. One, the hair-thin margins many of these companies have (See Diana Britton’s story. ) Incredible, because markets are soaring; it would be difficult to think of a better time to be in the financial advisory business than when the exchanges are consistently setting record highs. Of course, interest rates remain low and costs are rising, and that puts the squeeze on these firms. It’s a worrisome trend we’ve spoken about for some time. The narrow margins favor the larger firms, and we’ve seen smaller broker/dealers close up shop or be bought by would-be brokerage kingpins like Nicholas Schorsch’s RCS Capital.
We can probably expect more of this as the year goes on. The economics just don’t work for smaller broker/dealers anymore, and that’s too bad because there is a correlation between the size of a firm and a broker’s satisfaction levels. (See Megan Leonhardt’s story. )
The second point that struck me was that for the first time, asset-based fees from planning passed fees from commissions. The winning model in the advisory business is clearly some combination of fees and commissions, and independent brokers get it. Many of the firms have corporate RIAs that these advisors can tap into, or work to support advisors’ own RIAs. Far from having a chilling effect on the brokerage model, the trend toward fee-based planning seems to benefit these brokers just as it does planners “on the other side.”
Beyond Diana and Megan, whose efforts are really behind this year’s survey, I’d like to thank Elinor Delagrange, Penton’s senior research manager. Without Elinor, this project would never see the light of day. Her tenacity and attention to detail are behind every data point, and her commitment to intellectual honesty and statistical rigor is heartening. She is also incredibly patient and reassuring—not always easy when editors get grouchy and demands on her time are coming from all corners of the Penton empire.
I hope you find the survey enlightening. The full results can be found here on WealthManagement.com. We welcome your feedback.