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The 9 Requirements of a Modern Broker Dealer Relationship


The 9 Requirements of a Modern Broker Dealer Relationship

It’s not all apples to apples when it comes to comparing one IBD to another

While not that long ago it may have been enough for an independent broker dealer (IBD) simply to provide basic clearing and custody and perform mandatory regulatory oversight, advisors today expect much more. With so many options out there, what should an IBD advisor look for to ensure that either he is still in the right place or that any move he considers is the best one for his clients and his business goals?

Before starting any due diligence, it’s important to have a strategy that begins with an advisor first “checking in” with himself to gain a true understanding of his requirements—what he’s looking to accomplish for his clients and his business, and what he needs to fulfill his longer term vision.

You need to ask yourself:

“Do I see myself with my current broker dealer (BD) five or 10 years from now?”
“If I had to start over, would I still choose my current BD, given the options across the landscape and how my BD has changed?”
“What do I wish my BD would do to better support me and help me reach my goals?”

An Assessment Based on 9 Requirements

Whether this exercise is about determining if there is a better place or examining your current BD relationship by today’s higher standards of service, all quality BDs should, at a minimum, offer the following:

  1. A robust platform with access to financial and estate planning, trust, insurance, lending and alternatives—one that will allow you to capture clients of all sizes including niche business.
  2. Best-in-class technology with the financial strength and commitment to make this ongoing investment.
  3. The sophistication and expertise to anticipate, understand and prepare for regulatory changes, and respond by creating policies and practices that are appropriate for high-quality, top advisors and not merely designed to manage to the lowest common denominator.
  4. Support for business growth—both inorganic and organic. Acting as a strategic partner by providing help with inorganic growth such as recruiting, identifying acquisition possibilities, providing access to capital and expertise; and organic strategies including marketing support for new client development and the tools to support the business you want to develop.
  5. Practice management support including operational support to maximize your team’s efficiency and the profitability of the business.
  6. Succession planning assistance by helping to develop next-gen talent through training, recruiting and human resource development.
  7. Best practices for wealth management and investment management represented by the ability to associate and share thought leadership with like-minded individuals.
  8. Fair and transparent economics so you are able to readily understand the payout and the true costs of associating with a BD, and they should be well aligned with how you do your business.
  9. An accessible, responsive and knowledgeable support team that makes themselves available to you with answers that are meaningful and help, not hinder, your business processes.

Based on the above 9 criteria, you may find that your current BD is lacking.

And certainly it’s no secret that many options exist within the IBD space. Then why is it that some advisors do opt to stay where they are? Typically, they fall within one or more of the following 3 categories:

  1. They assume that all BDs are essentially the same and nothing better exists.
  2. They are simply “comfortable enough”. While they have some frustrations, they are able to make it work. The challenges don’t yet impact their ability to accomplish what they need to, and they are still able to insulate clients from whatever imperfections exist.
  3. They find the array of choices overwhelming and confusing. It’s easier to stay than to take on the additional burden of exploration and moving a business.

If you aren’t sure that your BD is the right one to support you today and for the long haul – that is, for the business as it looks today and the business you aspire to build – know that you are entitled to ask for more, and it’s out there if you know where to look. Taking a close look at the landscape and ensuring that you are comparing one to another on the right set of criteria will help an advisor take much of the complexity out of a dizzying array of choices.

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