From the May 2007 issue of Boomer Market Advisor • Subscribe!

What does broker/dealer support really mean?

Independent financial advisors need systems and business structures that support their individual approach to managing their practice. Just as no two clients are exactly the same, no two advisors define or reach success in the same way. Advisors need the ability to structure their business in the manner that is most likely to produce success for them.

Some advisors are transaction-based while others are money managers and high-end wealth managers. Wealth managers take a holistic approach to their client relationships and are involved in complete life and financial planning. Today's advisor-client relationships involve multiple product lines and platforms. The product spectrum can include insurance, mutual funds and individual equity investments. The platform can be broker/dealer-based or offered by an outside provider. Both spectrums, however, are separate from advisor compensation, which can either be an advisory fee or through traditional commissions.

As a result, the broker/dealer partnership is evolving in new and exciting ways. To be a true partner with the advisor, a broker/dealer must offer expanded services that provide the maximum amount of efficiency and flexibility. The shift from a traditional commission-based model to a fee-based advice model is a trend that continues today. It is essential that the broker/dealer view advisors in the same holistic manner that advisors view their clients.

While it's apparent that more advisors are conducting fee-based business, it's also clear that these advisors are conducting fee-based business in very different ways. In fact, there are as many different ways to utilize a fee-based structure as there are fee-based advisors.

As an advisor reviews the needs of his client, a broker/dealer that offers a variety of advisory platforms through its registered investment advisor can help provide product solutions. However, it is critical that success not be measured with products alone. A broker/dealer should fully support the wealth management model to ensure that advisors will not miss other key business opportunities.

A broker/dealer should have resources in place within its RIA to fully service the wealth management model, since fee-based business is processed differently than commission-based business. It's common for a broker/dealer to be fully staffed in the areas of marketing, technology, operations and compliance for their commission-based business. A broker/dealer that has staff in these same areas with expertise in the fee-based business will help maximize advisor success. The operational and compliance needs of a fee-based advisor are best served with staff dedicated specifically to supporting that product line.

An advanced educational curriculum in advisory services, insurance, retirement planning and other key topics is invaluable. The broker/dealer must offer education opportunities to advisors across all levels of experience. Advisor development programs such as these will sustain the growth that each broker/dealer needs.

Lastly, advisors must be able to independently evaluate each technology solution offered by a broker/dealer. Advisory platforms that are offered through the RIA should be based on latest technology, which includes advanced asset allocation, billing and performance reporting capabilities. However, additional considerations include ease of use, affordability and cost, particularly since the broker/dealer often includes technology as part of the overall partnership. Advisors should assess the willingness of the broker/dealer to adapt its customized technology offering in a way that supports the needs of the individual advisor.

Broker/dealer support is about much more than whether or not an advisor earns a living from commissions or fees. Rather, it's about giving advisors the confidence in -- and support from -- their broker/dealer at every stage of their career.

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