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Industry Standouts: The 2018 IA Broker-Dealer Reference Guide

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The face of the independent broker-dealer industry is changing. As IBD executives shared in this year’s Presidents Poll, overall pressures tied to fee compression and industry consolidation are top of mind. Meanwhile, financial advisors have their own competitive pressures as they push to add clients and assets.

For firms participating in Investment Advisor’s 2018 Broker-Dealer Reference Guide, the mix of good and bad news is revealed in the final tally. There are fewer firms today than several years ago, according to industry data and our research. This is translating, though, into a greater average number of advisors per firm: 1, 332 vs. 1,158 in 2016 — a 15% jump.

Plus, the number of advisors added at the 50-plus broker-dealers is approaching 9,000 vs. 7,100 two year ago, representing a 26% increase; that figure soars to about 73% when comparing ’18 additions with those of ’17. Average fees and commissions (or gross production) per registered rep is nearing $240,000 vs. roughly $220,000 in 2016 — a 9% improvement. And average assets per rep soared 40% in the past two years to some $37.6 million.

On the other hand, average gross revenue per broker-dealer participating in this survey seems to have fallen over the past two years by about 22% to an estimated $237 million; for the past year, though, that also represents an 36% improvement. Estimates for fee-based revenue per broker-dealer have weakened in the past two years; however, with the average level at about $103 million, it’s bucking the general trend.

Top Broker-Dealer Gross Revenue

LPL Financial’s latest full-year gross revenues were up 6% from the prior period. It’s strongest growth in 2017 was in asset-based revenues, which jumped 27% year over year; advisory revenues improved 9%, while commission revenues dropped 4%.

“We delivered another solid [fourth] quarter, capping a year of consistent business and financial results,” said President Dan Arnold, in a statement. For 2018, the IBD remains focused on its strategic priorities “of growing our core business and executing with excellence.”

Revenues for many IBDs continue to increase, including Raymond James, Commonwealth, MML and Cambridge. “Record client assets and the benefit from higher short-term interest rates enabled the Private Client Group … and [other] segments to generate record net revenues and pre-tax income” in the quarter ended Dec. 30, 2017,” said Raymond James Chairman and CEO Paul Reilly in a statement.

Top  Number of Registered Reps

The top two firms reported strong growth in their headcount tied to merges and acquisitions. For LPL Financial, the end-of-year number was boosted by the first onboarding wave of nearly 960 former National Planning Holdings advisors. Excluding this group, the IBD added about 100 net new advisors.

LPL recruited about $25 billion in new assets for the year in 2017, some of which it is onboarding in 2018, Arnold explained during the firm’s fourth-quarter earnings call in February. “We believe our core business growth demonstrates the appeal of our model and our advisors’ ability to win in the marketplace,” he added.

MML Investors Services, part of Massachusetts Mutual Life Insurance, wrapped up its merger with MSI Financial Services last year. The broker-dealer was acquired as part of MassMutual’s purchase of the MetLife Premier Client Group.

Top  Average Annual Gross Production

All broker-dealers strive to help their advisors succeed in their practices, but some excel in this area. How do they do it?

Raymond James says it relies on its view that “the integrity of the advisor-client relationship is integral to putting clients’ interests first,” according to Reilly. “We also believe our ability to attract and retain [productive] advisors is strengthened by our recognition of [this] relationship between financial advisors and their clients.”

Wayne Bloom, Commonwealth CEO, explained earlier this year that the firm’s advisors “put their clients’ needs first and foremost, and their objective, tailored approach to financial planning is respected by the industry; [also,] we maintain our commitment to providing the infrastructure and support these successful practices need to run their businesses and stay client-centric.”

Other leaders in this group include Prospera, Geneos, Strategic Financial, First Allied, Kestra and Founders Financial.

Top Number of Reps With Their Own RIA

Several firms working with the highest number of registered reps with their own registered investment advisor firm stand out for their smaller size and key characteristics.

Triad Advisors, for instance, works with independent hybrid financial advisory practices and registered investment advisory firms, which “are clearly drawn to our unique ability to provide advisors with a boutique, close-knit service culture combined with the world-class resources afforded to them by our publicly traded parent company, Ladenburg [Thalmann],” said Nathan Stibbs, Triad’s chief strategy officer.

PEAK President and CEO Glen McRary said recently in a statement, “We’re … advisors for advisors. We listen, we care, and it shows.” The firm emphasizes the accessibility of its “partners and peers, which collectively represent a deep pool of resources with exceptional marketing expertise.”

Janet Levaux is editor-in chief of Investment Advisor magazine. She can be reached at [email protected] Research editor Liana Roberts compiled all data. She can be reached at [email protected]