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Industry Spotlight > Broker Dealers

The Taste of Independence

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As I approach my first anniversary of independence I think back and consider the ups and downs I’ve experienced. For those of you in a wirehouse, bank, insurance company or other “captive” situation who are considering the move to independence, I encourage you to read on. I’m sure this can’t be said for everyone, but at least for me, once I tasted independence, there was no turning back.

I began my career with a large wirehouse and a low payout. There’s a definite culture that permeates the world of brokers and it doesn’t always fit neatly with an idealist who really wants to do the right thing for a client. The particular office I was in had about 35 brokers or financial consultants, whatever your pleasure, and eight of them were million-dollar producers. Of the eight, I would say that roughly half of them had a strong ethical character. So I’ve concluded that being a million-dollar producer doesn’t necessarily equate with high ethics. That’s where the fork in the road occurs.

The priorities are opposite with each leg. To the left is a sales culture with the potential for high income and to the right is a “client first” orientation, also with the potential for high income but with an ethical responsibility very much like a doctor’s Hippocratic Oath. It is because there is such a well-defined, definite standard in the medical profession that a high level of trust exists. Perhaps it’s time the financial services industry adopts such a standard for advisors. This would require an extreme departure from the current climate created over the past hundred years or so. Think about it. Companies would have to radically change the way they do business and especially the way they compensate their advisors.

There’s so much that goes on behind the scenes which consumers don’t see and frankly most advisors only hear bits and pieces about. Take, for example, how mutual fund company reps entice wirehouse brokers to sell their wares through financial incentives or how several brokerage firms push their reps to sell certain products because they make more money on them.

All of this may be good news for the independent RIA but not so good for the consumer. There are fewer conflicts of interest with the RIA platform which presents a tremendous opportunity to gain market share. Even with the defeat of the Merrill Rule, I don’t believe we’ll see a material change in the way brokers do business. Sure, they’ll satisfy the letter of the law, but it’s the spirit of the law that will continue to separate the brokers of this world from the RIAs.


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