Facts about independent broker-dealers

The law requires that a registered representative holding a Series 6 or Series 7 license must register with a broker-dealer in order to sell securities to the public. These clearing companies usually position themselves as one of three basic forms: full-service, discount or independent company.

Although the first two types of broker-dealers generally maintain a fairly high level of control over their representatives, independents usually allow their brokers to conduct business almost completely freely, which is important for many experienced producers who can afford to pay. Very attractive. Own management expenses and marketing expenses.

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An independent broker-dealer was created to accommodate financial advisors who hold securities licenses and need to provide back-office support for services such as compliance and transaction execution. These companies usually cater to more experienced consultants who generate high revenues from a complex client base.

Most consultants in this category no longer need a manager to supervise them, and generally do not want their company’s marketing department to require them to sell proprietary products. Many independent broker-dealers provide more comprehensive products and services than discount or full-service companies under their umbrella. Although most companies of any type will provide mainstream products, such as mutual funds, annuities, unit investment trusts, low- and medium-level automated portfolio management, and retirement accounts, independent companies can usually provide advanced fund management platforms and alternative tools that are not available to the general public , Such as hedge funds, oil and gas partnerships, and turnkey investment or savings plans designed for specific market segments, such as medical professionals.

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Eligible customers can also use other alternatives, such as venture capital, private placement and overseas holding.

Higher expenses, higher expenses

Another major advantage that independent broker-dealers offer planners is higher commission payments. Many discount brokers pay fixed salaries to their representatives and may also provide bonuses for production goals achieved at the branch or office level. Full-service companies usually provide a certain basic salary and set up a commission structure at the top. The commission percentage in this arrangement is usually between 30% and 60%, depending on the consultant’s production level, tenure and form of relationship with the company. Those who work as independent contractors usually get higher pay than those who are directly employed by the company. Of course, the planners and brokers who work in these companies usually have little or no management fees. The companies provide office space, business cards, marketing and administrative support, and other necessary amenities.

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Independent companies usually provide 80%-95% commission payments, allowing sales representatives to earn more from the same amount of business. Of course, they do not provide full-service support to their brokers, so those trying to decide which type of company is best for them need to clearly understand the out-of-pocket expenses that they will pay in the following situations. They take the independent route.

Although independent broker-dealers will not tell their representatives how to run their business, FINRA and the SEC still require them to provide compliance monitoring to ensure compliance with all relevant regulations. Many companies will also provide additional clearing support to assist in account management and record keeping, although this service may come at a price. Sales representatives may have a certain degree of choice in the services they decide to use and pay for.

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Key person; main force; important member

Although there are many independent broker-dealers in the market today, some of the largest and most famous companies include LPL Financial (LPLA), Raymond James (RFJ), Royal Alliance, Commonwealth, Cambridge, First Allied Securities, and Securian Financial. There are also some The company has both full-service and independent models, such as Ameriprise (AMP), Lincoln, AXA, Wells Fargo (WFC), Northwestern Mutual and Waddell & Reed.

Bottom line

Independent broker-dealers are usually the best choice for experienced planners because of their high commission expenses and minimal supervision. Sales representatives who choose to use them need to make sure that they will be able to generate enough revenue under this business model to cover their own expenses. For more information about independent companies, please visit the LinkedIn (LNKD) website of the National Association of Independent Brokers and Dealers.


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