Skip navigation
The Multi-Generational Independent Broker-Dealer

The Multi-Generational Independent Broker-Dealer

With no discernible model currently attractive to young investors, there is a considerable gap between how IBDs will retain assets that make that generational leap.

Headlines are rampant these days about the pending generational wealth transfer from Boomers to Gen X and beyond. With estimates that $10 to 50+ Trillion (yes, we’ll capitalize “Trillion” – it’s a big number) are expected to cross the generational boundary waters, financial service companies are trying to figure out the best way to position themselves for what is forecast to be a three-decade-long event.


It’s our belief that this event will significantly impact the independent broker-dealer community, and probably not in a good way. With no discernible model currently attractive to young investors, there is a considerable gap between how IBDs will retain assets that make that generational leap.


As money ages, it typically gravitates toward a full-service relationship and all of the ancillary services that go with it (financial planning, estate planning, etc.). Conversely, as money transfers to a younger generation, data shows it tends to gravitate toward a self-direct model that younger, tech-savvy investors now prefer. As younger investors also typically don’t seek out an advisor’s value-added ancillary services, and most advisors are unable to provide a self-direct solution to initiate a relationship with the inheriting generation, it becomes apparent that independent investment professionals will be at a disadvantage in managing the generational wealth transfer.


This is the bet that the robo-advisors are making, as are some online brokerages, specifically new firms like RobinHood which is offering brokerage strictly through a mobile app - not your father’s online broker.


So why can’t IBDs adapt? There are multiple reasons. In addition to different technology, support, back-office and compliance requirements, to succeed in the self-direct space you need to be able to transact business at a discounted rate. With most IBDs tied to clearing deals with high ticket charges, their ability to grow the self-direct model is not viable strictly on price alone. Start factoring in the other aforementioned variables necessary to support this business and the economics under the current IBD model are not workable.


So, as you step back, look at the IBD landscape, and consider the realities of what’s happening on the ground from all angles, it’s apparent that IBDs will be under considerable pressure as the wealth transfer picks up speed, and a younger generation, steeped in technology and self-reliance, takes control.


Yet there are a few IBDs that recognized these limitations as an opportunity. Such firms offer a hybrid solution that unites self-direct and full-service models onto a single platform that effectively supports multiple generations of investors and their different needs and wants.


The ability to support self-directed investors side by side with investment professionals operating in any capacity (RIA, IAR, broker or hybrid) has several distinct advantages:



  • Self-service and full-service models are consolidated on unified platform to cater to multiple generations of investors and to investment professionals.
  • Helps investment professionals maintain or increase wallet share as capital migrates between models.
  • Increases the potential value of the independent practice.
  • Offers investment professionals greater transparency to assets.
  • Provides a greater opportunity for advisors to engage clients and provide guidance at an earlier stage.
  • Offers advisors the ability to use self-directed accounts as a lead generation vehicle to establish relationships with younger investors and educate them on a broader array of products and services as their needs become more complex over time.
  • Delivers to independents a viable model that can compete with franchise models currently invading local markets.
  • Ability to deliver robo-advisor type solutions to cater to smaller and/or younger investors.



Such platforms must also cater to the growing sophistication of investors and professionals by offering advanced order features, including complex options strategies. With vanilla portfolio management practices facing increasing price pressure for not delivering added value, sophisticated investment management features are critical for professionals seeking to upgrade their service offerings, capabilities, and help to distinguish them from the competition.


Finally, as mentioned above, independents are under increasing pressure from franchised brokers and advisors employed by the independent’s own broker-dealer or custodian who, in effect, is out there trying to solicit their clients. Platforms that empower independent reps and advisors so they can shape the client experience based on what they want to provide their clients, whether they’re self-directed, require a full service experience, or a hybrid combination of the two.


By providing total flexibility on what products and services to deliver, hybrid platforms supports investors regardless of model, and puts independents at the forefront of the customer experience to remain relevant as money flows across all generations.




Gary Martino is the Vice President of Sales and Business Development at MoneyBlock (Member FINRA, SIPC), an online broker-dealer serving independent reps and advisors, and self-directed investors Prior to this role, Gary was Chief Operating Officer at brokersXpress.