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The 2020 Broker-Dealer Reference Guide: Best in the Business

by Janet Levaux and Liana Roberts

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Industry consolidation remains a dominant industry trend, according to data compiled by the Financial Industry Regulatory Authority and Investment Advisor’s 2020 Broker-Dealer Reference Guide.

FINRA’s latest figure for the total number of broker-dealers is about 3,500 — down from roughly 4,700 a decade ago and representing a drop of over 100 BDs on average each year.

The overall number of registered representatives is declining more slowly. It stands at about 629,500 vs. 630,300 a year earlier and 633,000 some 10 years ago.

Some recent deals in the broker-dealer space include LPL Financial’s purchase of Allen & Company last year; it had some 30 advisors and $3 billion in client assets. In late April, the IBD said it planned to buy Lucia Securities, which works with $1.5 billion.

And, of course, there’s the mega-deal that closed earlier this year: Advisor Group merging with the Ladenburg Thalmann BDs to create a group with about 11,300 advisors and $450 billion in assets.

(This transaction was announced in November, six months after private-equity group Reverence Capital Partners bought a majority stake in Advisor Group from Lightyear Capital, PSP Investments and others.)

In May, Advisor Group said three of the five ex-Ladenburg BDs — Investacorp, Securities Service Network and KMS — are set to become part of Securities America, the largest of the former-Ladenburg BDs. Securities America and SSN appear in this year’s top 10 lists, as do some other Advisor Group BDs.

Amidst the current turmoil, firms and their advisors can prove their mettle.

“Today, with some of these major strategy shifts, IBDs are proving to be more agile and adaptable to advisor demands and industry trends — and once again, represent a solid option for advisors considering independence,” explained Louis Diamond, executive vice president of Diamond Consultants.

Top 10 by BD Gross Revenue

 

The largest independent broker-dealer in the field continues to be LPL Financial, which had gross revenues of over $5.6 billion in 2019. Its gross profits were about $2.2 billion, and its net income was $560 million.

“We recruited $35 billion of assets over the full year, which was up from over $27 billion in the prior year,” according to President and CEO Dan Arnold.

IBD Raymond James Financial Services contributed some $2.6 billion of revenue to its parent company, which includes an employee-advisor segment and other businesses; in its fiscal year ending Oct. 31, 2019, the firm’s Private Client Group had net revenues of nearly $5.4 billion and over 8,000 advisors.

Other IBDs with strong gross revenue in 2019 include Commonwealth, Northwestern Mutual, MML, Cambridge and Advisor Group’s Royal Alliance.

Commonwealth said last fall that its fourth-quarter revenues were about 85% fee based and that commissions represent “an ever-shrinking number.”

Top 10 by Number of Registered Reps

 

LPL boosted its headcount by 355 from last year’s Top 10 list. It added 115 net new advisors in the fourth quarter.

To stay ahead of rivals, the IBD’s “first strategic play involves winning in our traditional independent and institutional markets while also expanding our affiliation models,” Arnold says. It recently rolled out offerings for RIAs and employee advisors.

In the No. 2 slot is MML Investors Services, the RIA and BD arm of MassMutual. Last year, it added the Brinker Capital Wealth Advisory to its platform, and MassMutual signed a licensing deal with Commonwealth’s tech entity, Advisor360.

Northwestern Mutual says its advisors and their teams “are increasingly being recognized as among best in the industry,” says Evamarie Schoenborn, head of its wealth management company.

Other IBDs with 2,000-plus indie advisors are RJFS, Avantax, Cambridge, Royal Alliance, Advisor Group’s Woodbury, Securities America and Commonwealth.

Top 10 by Average Annual Gross Production

 

IBDs are catching up to wirehouse firms like Merrill Lynch and Morgan Stanley, which ended 2019 with average fees and commissions of about $1.1 million per advisor.

Raymond James’ independent channel topped $680,000 in 2019, ahead of Ameriprise Financial’s $664,000 and up 3% from its average production level of $662,500 in 2018; over the past four quarters, advisors with a total of over $300 million of annual production joined its different segments.

Commonwealth improved its production level by 4% from 2018 to top $627,000. A 2018 IA Broker-Dealer of the Year, Geneos says its advisors had a similar jump in its average yearly fees and commissions and surpassed $486,000 in 2019.

Other BDs with yearly production of over $315,000 are Prospera (a 2019 BD of the Year), Kestra, Northwestern Mutual, Waddell & Reed, Arkadios Capital, Founders Financial and Independent Financial Group.

Top 10 by Number of Reps With Their Own RIA

 

Triad Advisors, now part of the Advisor Group of broker-dealers and formerly owned by Ladenburg Thalmann, had 640 affiliated advisors in 2019, and some 450 of them had their own RIA.

After its change of ownership, Triad is set to remain a standalone BD and just hired Brian Shulstad to help lead its Business Development team; he joined from LPL.

United Planner’s roughly 420 FAs included about 180 with their own RIA last year. The firm recently added several general partners to the firm and announced a plan “to provide ownership opportunities to other employees based on years of service through a new entity.” It is owned by employees (minority stake) and financial professionals (majority stake).

Other firms that made this list are SSN, Independent Financial Group, Lion Street (a 2017 BD of the Year), Securities America, Arkadios, American Portfolios (a 2019 BD of the Year), Geneos and Commonwealth.

See the Full Results of Top BDs of the Year

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].