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Industry Spotlight > Broker Dealers

Editor's Note: For Your Consideration

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As editor of this magazine and someone who’s been covering the independent advice industry for more than 10 years, I sit in an interesting spot. You, our readers, are people who I’ve come to know, understand, and admire. I’ve become friends, even good friends, with some of you. I’ve visited your homes and offices and met your staff.

I also get to meet the top executives of the firms with which you partner–the software makers, the mutual fund companies, insurers, consultants of every stripe and, most notably in this context, the custodians who would like you to custody your clients’ assets and the independent broker/dealers at which you hang your license(s).

For some time, the lines between custodian and indie B/D, between registered rep and registered investment advisor, have not been blurring, but overlapping. While it’s rare to see an RIA head back to the broker/dealer fold (though some B/D executives swear they have sighted this elusive creature), it’s become commonplace for a broker/dealer rep to also do advisory work, either through her own RIA or the broker/dealer’s corporate RIA. More recently, many of the larger, and dare I say it more far-sighted, broker/dealers have taken their RIA strategy a step further. At LPL, Raymond James, Commonwealth Financial, and the ING Advisors Network, to name but a few, affiliated reps and even otherwise unaffiliated RIAs can take advantage of new custody relationships with those B/Ds. It’s a smart business move, since much of the infrastructure in an independent B/D can just as easily support an RIA.

So here’s what I have to say to both RIAs and broker/dealers: You’re much more alike than you realize. Unless it’s all marketing BS, you are both in the business of helping your affiliated advice-givers better run their businesses and serve their clients. You both support the independent approach to such advice giving. You both want greater transparency and accountability on the part of product manufacturers and distributors. You both feel the burden of compliance. You both compete with larger firms who have a deep-pocketed head start in the marketing and advertising arena and in lobbying efforts and effect.

These days, your biggest worries center on the new locus of the financial industry in this country, Washington, where you fear that kneejerk reaction to the market and economic crisis and Bernie Madoff will make your lives more miserable while they provide no true safeguards for the clients you say you care so much about.

So why doesn’t the independent broker/dealer industry, which is represented most ably by the Financial Services Institute, and the new Financial Planning Coalition–consisting of the FPA, NAPFA, and the CFP Board–join forces in presenting a unified approach to the new best-and-brightest generation of legislators and executive branchers? Why not put aside your differences in the best interests of your independent reps and RIAs and their clients? Do it now when such unity could have a major impact, and then build on that marriage of convenience to build even stronger ties to each other in the future. Yes, each side may need to compromise in some areas, but as I said, you’re more alike than you are different, and it’s always better to merge from strength than weakness. And guess what: Your affiliated advisors and reps, and their clients, will be the net beneficiary. Put your lobbying muscle where your mouths are.


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