Misconceptions about working within a broker-dealer abound. They partially stem from a branding problem — many of our broker-dealer clients, as well as recruiters at a recent summit that Fidelity hosted, agree that the name “broker-dealer” doesn’t accurately describe what the firms do. Misconceptions are then compounded by the fact that some firms aren’t adequately illustrating their value proposition to advisors.
This hasn’t stopped broker-dealer firms from growing. For example, according to Cerulli’s Advisor Metrics 2017 report, national and regional broker-dealers grew assets 9.1% in 2016, outpacing all other advisor channels and besting the overall industry rate by nearly 2 percentage points — proving there is growth to be had in this business. What’s more, we’ve seen a compound annual growth rate of nearly 20% in assets in Fidelity’s broker-dealer segment over the last four years.
So, what can the segment do to maintain growth? We can start by painting a more accurate picture and articulating our value proposition. Here are five myths I commonly hear about working within a broker-dealer, debunked:
Myth #1: It’s negatively impacting my bottom line. When advisors compare their bottom line at a broker-dealer to another model, they might deduce that the “haircut” (the fees from the broker-dealer) isn’t worth the services they get in return. But the discrepancy often isn’t what it appears to be. Broker-dealers provide valuable resources like technology platforms and support, as well as marketing, practice management, compliance and administrative teams, and more. Those costs add up. The value of this support isn’t just monetary — it frees up mindshare as well. Advisors don’t need to spend time solving for those elements, so they can focus more on clients.
Broker-dealers need to articulate their value proposition so that advisors understand what the firm brings to their business. One way to do that is by correctly branding the firm, including possibly moving away from the term “broker-dealer.” A few of our clients have repositioned their businesses to better reflect what they do, as well as the value they offer both advisors and investors. For example, Ladenburg Thalmann describes itself as an independent advisory and brokerage firm, while Cambridge refers to itself as a financial solutions firm.