So I’m a slow learner. My education on independent broker/dealers began in the first week of January 1999 at a hole-in-the-wall, but very good, Malaysian restaurant in Eatontown, New Jersey. Having just joined the Investment Advisor staff as managing editor, over chicken pad thai I innocently asked then-editor-in-chief Bob Clark to explain those B/Ds’ business models. I mean, I understood and had been covering the big wirehouse firms, but who were these independent guys? By the time the last bit of tea was drunk and the fortune cookies were in crumbs, I was still stuck on divining the relationship between the reps and their home offices, and couldn’t quite figure out the benefits each side was getting from the other. It wasn’t until February 2008, while passing through an Orlando hotel lobby bar at the Financial Services Institute conference, that I received my BA in IBDs. Standing next to the aforementioned Mr. Clark while two younger onlookers tried to keep up, Philip Palaveev of Moss Adams explained in less than 10 minutes how B/Ds could survive, and even make some decent money, despite their extremely thin margins.
Plucking pertinent statistics out of thin air from the wealth of Moss Adams data that comfortably populates his 35-year-old head, punctuated by real-world anecdotes from the consulting work he had done with many of those B/Ds (names were changed to protect the clients), Mr. Palaveev not only described the current state of affairs, but went on to predict a much different near-term future for independent B/Ds.
Philip was kind enough to expand on that impromptu lecture as the centerpiece of our 44-page special report this month on the independent broker/dealer universe. I believe his article is a landmark look at an industry in flux, and that LPL Financial’s early May announcement that it was entering the RIA custody business confirmed Philip’s instincts.
The Special Report includes our second annual Presidents’ Poll, our 15th annual Broker/Dealer directory, and a neat piece from recruiting maven Jonathan Henschen on B/Ds’ latest switching enticements.
Then there’s a roundtable with our Broker/Dealer Advisory Board. On April 18, Senior Editor Kate McBride and I sat down in a Chicago conference room for our second graduate-level seminar in a year with Eric Meyers of Capital Financial Group/H. Beck, Eric Schwartz of Cambridge Investment Research, and Chris Ranney of Brecek & Young (Nick Sondel of Harbour Investments couldn’t join us in person but participated separately later). These four gentlemen have set the bar pretty high when it comes to helping the IA editorial team understand their firms and the industry’s priorities and challenges; I thank them for their service and their candor. You’ll thank them for their insight.
Finally, a wealth management team in Pittsburgh who partly attributes their success to their B/D, Commonwealth Financial, is profiled by our managing editor, Bob Keane.
Starting this month Mr. Keane has agreed to don another hat–that of columnist–for our new Green Advisor column, in which he’ll explore not only how advisors can invest with a green eye, but how you can be more green yourself. It can be a differentiator for you, we think, your clients may very well expect you to be aware, and it might also just be the right thing to do. It will be an education.