Independent broker dealer recruiter Jon Henschen Publishes "Small Broker-Dealers' Secret Weapon" shows how thriving smaller firms have an area of specialization, such as alternative investments. Profitable smaller firms typically have low staff turnover, so competency is high, resulting in correct answers and quick response times.
MINNEAPOLIS, May 20, 2022 /PRNewswire-PRWeb/ -- Featured May 9, 2022 on ThinkAdvisor.com, independent broker dealer recruiter Jon Henschen's article "Small Broker-Dealers' Secret Weapon" demonstrates how thriving smaller firms have an area of specialization, such as alternative investments. Smaller firms with high-quality advisors also have fewer compliance issues because they know their advisors better than larger firms. Profitable smaller firms typically have low staff turnover, so competency is high, resulting in correct answers and quick response times.
This article may run counterintuitive to many industry voices when it pertains to smaller broker-dealers, and by small, I'm referring to broker-dealers with under 200 representatives. One example of industry voices is LPL's recent comments, on the back of a very successful year of recruiting, that they would be focused on acquisition of small BDs going forward. In spite of the doom and gloom portrayed about small broker-dealers, there are smaller firms that are not only surviving but thriving and growing. How can this be?
You would think the chips would be stacked against them, since they lack the substantial scale that brings more profit, are unable to compete on transition money like the larger firms offer and lack the resources for a stable of proprietary services.
Granted, there are certainly smaller firms that don't know what they are doing and operate on razor-thin margins, and their compliance and due diligence teams are laughable. These will be the target of firms such as LPL, and this is especially true for smaller firms that are generalists, failing to set themselves apart from larger BDs. The smaller firms that are thriving have an area of specialization that they do very well with — for example, alternative investments. Sales of alternative investments and real estate investment trusts require high-quality due diligence by the BD.
Many firms have been brought down by these products in a hailstorm of litigation when they failed to implement adequate due diligence as well as policies and procedures in the sale of said products. The firms that do product due diligence competently are able to attract advisors with accredited and qualified investors that hunger for limited-availability products, and earn very attractive profits at the same time. Profitability is only part of the picture.
Large firms are black-and-white in how they operate because the large number of advisors makes them incapable of operating otherwise. Smaller firms with high-quality advisors have lower incidence of compliance issues because they know their advisors much better than larger firm. Larger-firm management applies the 80/20 rule when it comes to pursuing relationships with their advisors, focusing on the top 20% at best. Meanwhile smaller firms know, and focus on nearly all of their advisors.
Entrepreneurial advisors who think outside the box, wanting varying solutions for their clients, can feel restricted or trapped at larger firms. Smaller firms can customize to individual advisors' needs rather than asking advisors to fit into a cookie-cutter platform. Relationship-driven advisors prefer smaller firms where they have the ear of upper management. The advisors' input has substantial weight on firm policy, and their time at conferences can feel like a family reunion (family they enjoy, that is!).
When advisors call in to the home office, they have go-to people they know by name, not a phone tree. Profitable smaller firms typically have low staff turnover, so staff competency is high, resulting in correct answers to questions and quick response times.
Even though the industry has changed in many ways, small BDs that deliver expertise and specialization and bring value that the larger firms can't provide will continue to thrive and grow
Jon Henschen is founder of http://www.henschenassoc.com, an independent recruiting firm focused on independent broker dealers and RIAs based in Marine on St. Croix, MN. With more than 30 years of industry experience, Jon is a staunch advocate for independent financial advisors, and is widely sought after by both advisors, broker dealers and RIAs for his expertise and insight on industry topics. He is frequently published and quoted in a variety of industry sources, including Wealth Management, ThinkAdvisor, Investment Advisor Magazine, Wealth Management Magazine, Financial Advisor IQ, Financial Advisor Magazine, Investment News and others."
Media Contact
Cristi Barkley, Henschen & Associates, 7578464107, [email protected]
SOURCE Henschen & Associates
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