From the June 2012 issue of Investment Advisor • Subscribe!

The 2012 Broker-Dealer Presidents’ Poll

We asked the presidents at top broker-dealers about challenges to their business, their reps and their futures

It’s that time of year again. We asked the presidents at top broker-dealers about challenges to their business, their reps and their futures. Some of their answers didn’t exactly surprise us, but the presidents’ responses paint a picture of an industry in flux that still has a lot of potential. Editor-in-Chief John Sullivan breaks down the results.

Click here for a by-the-numbers comparison of the respondents over the past three years.

1. What issues do you feel are the most challenging to your firm business-wise in the short term (next 18 months)?

What issues do you feel are the most challenging to your firm business-wise in the short term (next 18 months)?

As if navigating the current volatility isn’t hard enough, throw regulation, rep recruitment and retention and all that comes with running a business into the mix, and it’s easy to see respondents have their work cut out for them. “Retaining rep force/recruiting the right reps” took the top spot, with 40% of the presidents having a hard time warding off the competition. “Federal budget troubles and ballooning U.S. debt” got a lowly 3.6%, suggesting that although it’s an election year, few are taking notice in their day-to-day business.

2. What issues do you feel are the most challenging to your firm business-wise in the long term (next three to five years)?

What issues do you feel are the most challenging to your firm business-wise in the long term (next three to five years)?

When asked about their longer term views, “Dealing with margin squeeze” took the top spot. Little surprise here, as a number of smaller broker-dealers have exited the business recently for this very reason. “The aging of your rep force” tied for last place, suggesting that although everyone’s talking about succession planning, the execution isn’t quite there. We’d like to be optimistic and say the reason BD presidents aren’t worried is because they’ve already planned for it, but we know this industry too well.

3. What issues do you feel are the most challenging to individual reps in the short term (next 18 months)?

What issues do you feel are the most challenging to individual reps in the short term (next 18 months)?

Of course, “Finding the best new clients” will always be of import to individual reps, as it’s the lifeblood of their businesses. What struck us as odd, though, was “Trusting their broker-dealer” only rated 5.5%. We had a feeling (just a feeling) that the number would be higher among the rep population, given the number of broker-dealers that have “voluntarily” closed their doors recently.

4. What issues do you feel are the most challenging to individual reps over the long term (next three to five years)?

What issues do you feel are the most challenging to individual reps over the long term (next three to five years)?

Looking ahead three to five years, “Building reliable retirement income streams for clients” and “Determining their own succession plans” almost tied as the biggest challenges. Retirement income is, and will be, a dominant theme for the coming decade. How well broker-dealers can assist their advisors in this area is still to be seen.

5. Which industry association/entity do you feel is most essential to advancing your point of view, especially in Washington, D.C.?

Which industry association/entity do you feel is most essential to advancing your point of view, especially in Washington, D.C.?

OK, it’s a broker-dealer presidents’ poll; is anyone surprised by these numbers? FSI has had a number of “wins” lately. 2011 was a break-out year for FSI, and we see 2012 as equally important. They successfully advocated for the delay of the Department of Labor’s (DOL) proposed rule that would have redefined the term “fiduciary.” They stalled, indefinitely, the SEC’s threatened reform of 12(b)-1 fees. FSI also influenced the Dodd-Frank-mandated SEC Standard of Care study which referenced FSI’s recommendations over 30 times. And they feel pretty good about successfully advocating for the repeal of expanded 1099 reporting requirements.

6. Are you confident that the independent broker-dealer model will remain viable?

Are you confident that the independent broker-dealer model will remain viable?

What else would they say: “No, it’s all going to hell”? Despite headwinds, the independent broker-dealer had a pretty good year. Yes, smaller broker-dealers struggled, but at least they aren’t a wirehouse. Judging from assets and individuals joining that channel, it isn’t only BD presidents who believe in its long-term viability. 

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