Marine on St. Croix (PRWEB) April 29, 2014
In his recent article “The Small, Generalist Broker-Dealer: R.I.P.?” published on ThinkAdvisor, broker dealer recruiter Jon Henschen of Henschen & Associates discusses the impact that heavy-handed regulation by the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) is having on the broker dealer community, and how strikingly similar the situation facing small broker dealers today is to that of community banks.
Henschen begins his analysis by discussing the House Committee on Oversight and Government Reform’s hearing, “Regulatory Burdens: The Impact of Dodd Frank on Community Banks.” At the hearing, Wake Forest University Professor Tanya Marsh discussed how “Dodd-Frank builds on decades of ‘one-size-fits-all’ regulation of financial institutions, an ill-conceived regulatory framework that puts community banks at a competitive disadvantage to their larger, more complex competitors.”
According to Henschen, Marsh could have been speaking about small broker-dealers when she testified that, “with respect to compliance, community banks are at a disadvantage because they do not have their larger competitors’ sophisticated legal and compliance staffs to interpret the new rules and regulations and look for effective ways to comply with those regulations without compromising their ability to serve customers and earn profits.”
Henschen observes that as the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) continue to pile on regulations in response to Dodd Frank, the number of broker dealers in the marketplace is declining, as is the number of new broker dealer formations. The article also discusses which small broker dealers will survive the onslaught of regulation, and which are likely to falter.
Henschen points out that, as with community banks, small broker-dealers can least afford compliance costs or compliance mistakes, making the future of the generalist small broker-dealer look grim. Large firms may be gloating over their advantages now, but that exhilaration may be short lived.
According to Henschen, “With the closure of many small BD firms, and a decline in the number of new broker-dealer formations, this segment of our industry is like the canary in the coal mine. With ever-increasing regulation, what is ailing small-broker dealers today will affect midsize firms tomorrow and eventually work its way up to the larger firms.”
Jon Henschen is President of Henschen & Associates, an independent broker dealer recruiting firm located in Marine on St. Croix, Minnesota. With more than 20 years of industry experience, Jon is a staunch advocate for independent financial advisors, and is widely sought after by both reps and broker dealers for his expertise and advice on independent broker dealer topics.