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Independent Broker Dealer Options

There is no denying the allure of the independent broker dealer environment.  For years advisors have been flocking to the Independent Broker Dealer model for a variety of reasons.  Higher compensation, freedom and the flexibility to run a business the way you see fit are just a few of the many attractive qualities the independent model offers. While the IBD model has gained in popularity for many of the known reasons, one of the less known qualities independent broker dealers offer are the various ways advisors can affiliate.  These affiliation models may not only help advisors grow their business but can also increase an advisors net bottom line.


For years now, many broker dealers have been fostering relationships with producer groups that many call super OSJ’s (Offices of Supervisory Jurisdiction that supervise and provide support and services to other independent advisors).  Successful OSJ practices bring real and substantial value to the table.  These groups of producers offer a variety of benefits that may include-

1)    Higher compensation- Most broker dealers offer payouts based on grid revenue.  Enterprise groups have the ability to pull production together and may receive payouts that give them the flexibility to offer an affiliating advisor a better payout than they would receive if they were to join the broker dealer direct.

2)    Comradery- For advisors that desire Independence, but don’t want an environment where they feel alone, the OSJ model may offer the feeling of being in a more intimate relationship.  Some producer groups offer training, regional meetings and localized support.   Local support may also provide an advisor access to an existing branch where the infrastructure is turn-key and can include office space, an assistant and technology.

3)    Business building tools- If you are looking to grow your book of business, the OSJ model may offer invaluable resources.  Some OSJ groups offer trainings into business specialties, such as retirement or insurance, and offer leads in that specialty. This can be particularly helpful for those looking to break into new geographic areas or simply want a more niche practice.

Another affiliation model that has increased in popularity and continues to be a very good option for many advisors is the hybrid model.  “Hybrid advisor” has a few definitions. I define hybrid advisors as those who maintain their securities license and transact commission-based business through a broker dealer (business governed by FINRA) while at the same time operating under a fee-based model as their own RIA (overseen by the SEC or state depending on their level of assets under management).


While broker dealers traditionally charge their independent RIAs a percentage of their gross dealer concessions, competition has resulted in their offering ramped up services including practice management, education, compliance and legal support in exchange for that fee. Competition has also influenced many broker dealers to increase payouts on hybrid advisor fee-based business.  Broker dealers with hybrid platforms offer not only invaluable resources and support but also provide advisors “the best of both worlds”, offering maximized product availability with high levels of net compensation.


The third affiliation model that has become more prevalent and that most advisors find beneficial is home office supervision for single producers.  This model has been enacted by most independent broker dealers as a result of pressure from regulators who are pushing to eliminate the self-supervision model.  In the past, independent broker dealers required an advisor that was operating remotely to acquire a series 24 license (entitling the holder to supervise and manage branch activities).  Today, the majority of broker dealers have moved away from this model.  This home office supervision model benefits advisors in two major ways.  First, it eliminates duties such as reviewing his/her own communications, approving new accounts and ensuring the suitability of client activity.  Secondly, this model is typically viewed as attractive as many firms are not charging advisors for the extra supervision they are providing.  In summary this model creates less work for the advisor therefor giving them more time to spend with clients.


The independent broker dealer landscape is incredibly diverse, providing not only a variety of firms, but also wide-ranging in the affiliation models advisors can choose from.  And while I always encourage advisors to explore what firms can provide, it’s equally important to consider the attractive ways you can affiliate.


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