So You Want to Change Brokers? 10 Questions You Need to Ask to Find the Right Fit

So You Want to Change Brokers? 10 Questions You Need to Ask to Find the Right Fit

With summer winding down and the cool winds beginning to blow (in Chicago, anyway), recruiting season has unofficially kicked off. Late Q3 and Q4 represents the time of year when the culmination of events cause an annual migration of investment professionals to head out to the broker-dealer hunting grounds.

So if you find yourself searching for a new affiliation, it’s a good time to revisit the types of questions you should be asking any prospective recruiter. Due diligence is a two-way street and, at this stage, it’s important to remember a couple things: 1) you control the process; and 2) not every broker-dealer is a great fit for your practice. So be prepared to be specific and ask questions important to both your current and future business needs, and demand detailed answers in return.

Does the technology offering match what my business and my clients currently need and may want?

Since 70 percent of IBDs use their clearing firm’s platforms, the range of technology choices is fairly limited. Even still, you’ll want to drill down to determine whether the platform saves time and allows you to work more efficiently and cost effectively. Can you and your client view the same information at the same time, and in real time? Is it web-based or do you have to use a client application? Is it fully integrated or are you using multiple apps to manage different processes? And then there are questions of what products the platform enables you to use.

Here’s why detailed questions matter. A simple question I often hear is, “Can I use options?” While many broker-dealers may answer with a “yes,” the actual answer is much more complex. If you intend to use complex options spreads, or options in qualified accounts, or need the ability to enter them online as a group trade or on an account by account basis, the answer will often times be “no.” If these requirements are part of your business, discovering after the fact that your new platform doesn’t allow it can be a nightmare.   

Also, consider whether you want to allow clients to manage their own money on the same platform. Many platforms are read-only and don’t allow you to recruit client assets (increasing convenience and wallet share) that they manage directly.

Finally, determine how data can be exported/imported to other third-party platforms (i.e. financial planning) you may be using. This can be critical to maintaining business efficiency and accuracy.

What are the broker-dealer’s primary revenue sources?

This is just another way to ask whether the firm can adequately service your type of business. If a firm primarily earns their revenue from variable annuities or mutual funds, it may not be the best place if you do more traditional equities securities business, and vice versa. Sure, each may be accommodative, but they may not be the best fit, and finding the best fit will lead to greater satisfaction (i.e. less frustration) over the long haul for both you and your clients.

Does the firm allow me to use the investments I want to use now and as my clients’ needs evolve?

Do they offer alternative investments, futures, specific insurance products, mutual funds or 529 plans and if not would they be willing to consider adding them? What about advanced strategy concepts, like complex options spreads? Where are you limited and how will that affect your business growth?

Do you have a complete fee schedule for me and my clients?

One of the biggest causes of frustration for an advisor switching B-Ds is a lack of initial understanding of all of the miscellaneous fees reps claim not to have known about until after they have affiliated with their new firm. Ask for a complete schedule. You might be surprised that placing an order through the trade desk gets tagged with an upcharge, or that there’s a sizable postage and handling fee attached to each transaction.

Also, many reps and advisors can be lured in by initial upfront affiliation bonuses. Understand how that impacts your revenue stream (higher ticket charges, more fees, lower payout) over the long haul. Remember, broker-dealers are in the business to make a buck, too. They won’t give away money if they don’t think they’ll earn it back over time.

How flexible is the advisory fee and/or commission schedule?

Some firms are very rigid in the fee and commission schedules you can charge. One uniform schedule for all. If you want to apply varying schedules depending on account types, services offered, or types of products, make sure you have the flexibility to customize the fee or commission schedules as you see fit.

Is it really my business if I decide to leave?

This should be spelled out in your agreement. Terms may be different based on the book you bring in and the book you may want to carry out. Accounts acquired prior to your affiliation may be considered yours, while those acquired post-affiliation may be considered the broker-dealer’s. And if you’re going independent for the first time, can you leave with any of the book you built?

What is the B-D doing to save me time, so I can grow and manage my book?

This is one of those things that needs to be demonstrated so you can see where a prospective broker-dealer is making your life easier. Get a complete picture of how processes important to your business are handled. Be careful not to get sold on “our desk and back office support is unmatched.” Everyone says it. But you can only really know by experiencing it yourself or getting a handful of referrals to talk about their experiences.

Does my input not only reach the broker-dealer’s decision makers, but does it have an impact?

Obviously, in larger IBDs reaching key executives and impacting business or technology offerings becomes more difficult just because of the scale of the business. Finding a broker-dealer willing to be flexible as your needs change (new service offerings, different technology features) will add to your satisfaction over time. It does help if your B-D has its own platform, but more importantly they should recognize that reps and advisors are one of their greatest assets. And, since you are the ones using the platform to service clients on a day-to-day basis, you are more qualified than the development team to provide guidance on what technology will make things easier.

Can you walk me through your account opening and management process?

Ask for a demo, preferably one you can drive on your own. If you’re stuck processing a lot of paper, think how that will impact your ability to manage and grow your business. This is important to consider not just during the transition process but going forward as well. All too often I have heard the nightmares about firms bending over backwards to help a rep or advisor open their accounts during the initial transition, but once that was done and it was left to the rep or advisor to open accounts going forward, they found out how cumbersome and inefficient the process was.

How does your compliance and supervisory processes work?

You see, I said “processes.” Often misunderstood, broker-dealer compliance and supervision are two distinct processes. It’s important to have an understanding as to how each of these systems work and impact your business. Be sure to get an understanding of what requirements or restrictions may be applied on any outside business activities. Feel free to ask to talk to someone in compliance or your prospective direct supervisor for more detailed information.

Asking these questions – and adding ones specific to your business – will help ensure that you are not sold on a B-D that won’t fit your business. In the long run, it’s better for you and the broker-dealer to identify your needs beforehand, rather than have a relationship sour because the needs and requirements aren’t aligned. Once you move your book, you’re likely not going to move it again for at least two years. It’s a pain for you and your clients, and can be very disruptive to your business.


Gary Martino is the Vice President of Sales and Business Development at MoneyBlock (Member FINRASIPC), an online broker-dealer serving independent reps and advisors ( Prior to this role, Gary was Chief Operating Officer at brokersXpress, where he helped on-board more than 650 independent reps and advisors.