Financial advisors face increasing frustration with their broker-dealer relationships, driven largely by ongoing industry consolidation and a perceived lack of alignment with their business needs. As independent advisors strive to operate as business owners, many find their autonomy and client service capabilities hampered by their broker-dealer affiliations.
The constant churn of mergers and acquisitions creates significant uncertainty. Advisors may choose a firm based on specific values or capabilities, only to find themselves under new ownership with different objectives shortly thereafter.
"Advisors are tired of being bought, sold and traded like a commodity," says Sheila Cuffari-Agasi, AIF, Executive Vice President, Partner Development at United Planners. "Independent advisors are business owners. As a result, you would think that they would have more 'destiny control' over the ownership of their broker-dealer. However, they often make a decision to affiliate with one firm, and soon find themselves hamstrung and underserved by a completely different corporate partner."
This instability is compounded by structural issues within many broker-dealers. Firms beholden to public shareholders, private equity owners, or corporate parents often face inherent conflicts, potentially prioritizing proprietary products or profit margins over advisor needs. Financial pressures can lead to "penny scraping," higher costs, and diminished service levels, further straining the advisor-BD relationship.
The Toll of Instability and Misalignment
Historically, inadequate service and poor technology deployment have driven advisors away from broker-dealers. These shortcomings hinder advisor efficiency and productivity, pushing them toward more supportive environments. The trend of acquisitions exacerbates this problem.
"We often encounter advisors who switch broker-dealers after determining the upcoming acquisition did not align with the best interest of their clients, only to see their new firm later acquired by the same entity they avoided a few years earlier," says Sara Vogelsanger, Transition Manager at United Planners.
Since 2013, a surge in broker-dealer sales, often driven by owners seeking high payouts with little regard for future stability, has left many advisors wary. This focus on short-term financial gain over long-term continuity raises significant concerns for financial professionals seeking a stable partner.
Defining the Ideal Broker-Dealer Partnership
Advisors evaluating potential broker-dealer partners should consider several critical factors beyond basic services:
- Appropriate Scale and Financial Strength:
Seek a firm large enough to offer robust resources and stability, but not so large that individual advisors get lost. Verify financial health, a stable history, and reasonable growth plans.
- Reputation and Values Alignment:
Look for industry experience, a mature home office staff, and a strong reputation. "Advisors are no longer looking at broker-dealers as a commodity or necessary evil," says Mike Baker, President & CEO of United Planners. "First and foremost, quality advisors are evaluating broker-dealer partners as to their historic, current, and future commitment and alignment to the core values of honesty, independence, collaborative and supportive client centric service, and friendly family culture."
- Comprehensive Resources:
Ensure access to essential support, including training for advisors and staff, practice management coaching, and guidance through the complex regulatory environment. Advisors need partners who help implement cost-effective technologies and maintain high compliance standards.
- Supportive Culture:
A culture that fosters relationships with home office staff, encourages peer networking, and provides access to senior management is crucial for long-term satisfaction and professional development.
- Technology and Flexibility:
Prioritize firms offering strong technology support and a hybrid open architecture. This allows freedom of choice in platforms and products, enabling advisors to operate without restrictions from proprietary systems and select solutions that best fit client needs.
- Commitment to Service:
Ethical, fiduciary-minded advisors thrive with broker-dealers that share a "client-first" ethos and treat advisors with respect.
Structure Matters: An Example of Alignment
One way firms address the core issue of control and alignment is through structure. For example, United Planners, founded in 1987, utilizes a Limited Partnership model where producing advisors hold majority ownership (55%) and voting rights on major issues, including potential sales.
"We don't have a parent company," says Cuffari-Agasi. "We are structured as a limited partnership, and our advisors are partners and owners." This structure, she notes, returns "destiny control" to advisors and helps prevent unwanted acquisitions, ensuring alignment between the firm and its advisor partners. Furthermore, this model facilitates profit sharing directly back to the advisors.
Complementing this structure is a commitment to open architecture. "As an independent firm, United Planners does not build proprietary products or services, and does not mandate our advisors sell such proprietary products or services," says Baker. "Our advisors enjoy the freedom of choice to select the product or service that best fits the needs of the client."
The Advisor Experience
For advisors like Brian Gotta, registered principal with Gotta Retirement Services, who has been affiliated with United Planners for over 25 years, the benefits translate into practical advantages. "I joined United Planners due to my desire to work with my dad and also the ability to be an independent entrepreneurial advisor," he says.
Gotta values the ability to run his business with significant independence, fair compliance oversight, and a strong peer network. "I appreciate the many personalities and variety of advisor peers throughout the country I can talk with, share, and learn from," he adds. This support allows him to focus on serving his clients effectively.
Choosing the right broker-dealer is a critical strategic decision. Advisors seeking long-term success should look beyond superficial offerings and conduct thorough due diligence on a potential partner's structure, stability, culture, and commitment to advisor independence and client interests.
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Contact Partner Development at United Planners for a consultation on how open architecture can be of value to you and your clients.
United Planners Financial Services 7333 E. Doubletree Ranch Road, Suite 120 Scottsdale, AZ 85258 UnitedPlanners.com
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