Selecting an Independent/Broker Dealer that’s Right for You
By Michael Fisher

For financial consultants, picking the right independent broker/dealer for affiliation is one of the most important decisions they can make to benefit their business. While the right broker/dealer can provide effective support for your business and lead to greater success, the wrong firm can actually hamper your efforts. Ensuring that your future broker/dealer becomes your partner and is the appropriate one for you requires both an internal analysis of your business and thorough marketplace research. The most suitable broker/dealer is one who not only provides the levels of service and compensation you require, but does so within a firm culture that meshes well with your personality and the mission of your financial business.

To determine which broker/dealer is best for your business, it is recommended that you evaluate broker/dealers based on pre-determined criteria. In order to make a sound decision you will need to take a hard look at specifics. You will want to look over the marketing materials, speak to financial consultants of the firm that you are considering, and even visit the broker/dealer’s headquarters. If it is feasible, you might consider talking to their clearing firm or even some financial consultants to get a complete perspective. As you evaluate each broker/dealer, you will want to consider the following:

Corporate Culture. First, and perhaps foremost, have a discussion with several individuals associated with the broker/dealer to determine if they will be a good fit for you and your business. This includes looking at the vision and reputation of the broker/dealer’s management, the experience and background of the support staff and the goals and targets of other consultants in the firm. Consider the size of the firm and their modus operandi to determine whether you will become just another number or a bona fide business partner. Finally, take a look at the company as a whole. Is their main objective to support your business, or work for their own success?

Compliance. Arguably, the most essential service a broker/dealer offers is compliance. In an environment where compliance requirements change frequently, financial consultants require expert assistance to help them stay the right course. To ensure that your broker/dealer will offer the support you need, ask about the experience, training and responsiveness of the compliance team.

Clearing firm. Look for a broker/dealer backed by a substantial clearing firm with an excellent reputation for providing solid service. Research the firm to ensure that it is a name that is trusted in the industry and has the resources to provide first-class support service.

Flexibility. Most consultants choose an independent broker/dealer to attain a greater level of autonomy for their business. You might contact representatives of the broker/dealer you are considering to see if they allow for the flexibility that gives consultants a meaningful level of independence. Take a close look at the broker/dealer to determine if they provide the responsive service, personalized attention and flexibility that allows consultants to build their own business brand.

Product Selection. While it is not essential that your future broker/dealer offer an exhaustive list of investment vehicles, it is important that the products you currently offer to your clients (or plan to offer in the future) are available to you. Additionally, examine the firm's product line to ensure it won’t compromise your autonomy. If there are incentives to sell proprietary products, you may want to look elsewhere.

Technology Offerings. Ask about the technical applications the broker/dealer offers. You should consider not only what is offered, but also how quickly the firm adapts to new technologies to meet marketplace needs. Also, find out what product support is provided and whether there are product specialists to turn to when needed.

Payout Schedule. It is important to review a payout schedule for all the investment products offered, but it may not tell the whole picture. When considering the broker/dealer offering the highest payout levels, ask yourself what you may be sacrificing by partnering with them, and whether it is worth it in light of your business situation. Also, look at their “standard costs”, such as your ticket charges, and any other “hidden costs” to assess the true compensation potential.

Back Office Support. Research the various types of support the broker/dealer offers and examine how it will be delivered. Consider your access to the various departments of the broker/dealer and the ease with which you could get help if a problem should arise.

While it is recommended that you make a systematic assessment of your choices, don't forget to listen to what your instincts tell you. In reality, there is no "best" independent broker/dealer—but there are more appropriate choices based on your individual circumstances. As you make your decision, carefully consider the individualized needs of your business and what the broker/dealer offers to help you to meet them.

About the Author

Michael Fisher is Executive Vice-President of 1st Discount Brokerage (1DB), an independent broker/dealer that caters to entrepreneurial financial consultants. For more information about becoming an Independent Financial Consultant with 1DB, direct your inquiry to mfisher@1db.com. You can explore the range of 1DB capabilities at www.1dbreps.com.

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