A Broker/Dealer story – Truth or Urban Legend?

Back in the early 2000’s there was a TV series I used to like called Freaky Stories where every episode started with:

“This is a true story, it happened to a friend of a friend of mine”


The show stretched common urban legends and the point was that some stories are so absurd, so improbable, they couldn’t possibly be true – even if you heard it happened to a friend of a friend.

Unfortunately, as an advisor placement firm, I hear stories almost every day that fall into this category.   I know they are true, they happen too often not to be, but I still have to shake my head and it takes me back to my earlier days with Freaky Stories.

Here’s one story – from a friend of a friend of mine, and what we are doing about it.


The Freaky Story:

I’m currently working with a successful advisor within a well-known wirehouse firm. Earlier last year he had submitted a request within his firm that would allow him to work from his home office in California and continue working with his clients in Colorado. The advisor had met the love of his life in Southern California a few years earlier and they are engaged to be married. He wants to live the rest of his life with her but he does not want to lose his client base in Colorado – which as you know would essentially mean starting over from scratch in California.

He went through the process of submitting everything the firm requested and received full approval to work in both states. With euphoric glee, he and his new love found the perfect home for their future and opened escrow towards the end of 2013. Christmas and New Year’s came and went, escrow on their new home turned into approval of loan documents and they were ready to get their new keys when he received a call from headquarters.

The firm had changed their stance on approving his dual location and management retracted their approval to work out of his new home office in California. They made it very clear to him that he was only to work out of the Colorado office and have zero access to working out of his new home in California. He was devastated.   After being referred to RepRecruit by another advisor, he called me for advice.

We broke down some of his options. One of those options was going direct to a broker dealer. Here’s what we talked about.


Going Direct Through a Broker/Dealer - The Top FIVE Considerations:


ONE - Higher payout and more freedom

  • Going direct gives you the highest payouts
  • Cuts out the “middle-men” that take way from your net revenues (with astounding gross payouts ranging between 85%-98% on all product lines.)
  • Allows you to work out of your home office
  • Provides the opportunity to work in multiple states
  • Opens the door to new products that will help you grow your revenue


TWO - Higher expenses and more responsibility

  • When you go direct through B/D, all expenses (although mostly tax deductible) are yours
  • You control all costs – you decide what you need and what you don’t need
  • Your new freedom does come with a bigger price- office space, furniture, potentially an assistant or/and staff member.
  • Having your own office means deciding on your own look of office furniture, your own style and your own client accommodations.


THREE - Becoming a business owner isn’t for everyone

  • Some people struggle with all the administration that comes with owning their own business and would rather stick to prospecting and closing sales.
  • Prepare yourself for a laundry list of items to manage, including but not limited to:
    • stationary,
    • phone bills,
    • internet bills,
    • water,
    • heating,
    • cooling,
    • advertising,
    • growing your business,
    • broker/dealer compliance regulations
    • more broker/dealer compliance regulations.
  • Working from home helps cut most of these expenses if you’re comfortable meeting clients at local coffee houses, restaurants or at the client’s home or place of business.


FOUR – Sales assistant or office staff

  • Salaries are the biggest expense
  • Staff can also provide you the flexibility to come and go more freely.
  • It’s great to have someone to cover the office and phones as you take vacations or travel between your different office locations.


FIVE – Building a local presence

  • Building a local presence will take time, effort and money.
  • Advertising, promotion and building out your name recognition is key to success! It isn’t easy to achieve quickly but very rewarding in the long haul.
  • Building out your brand will help create equity in your practice should you decide to sell your book and business down the road.


The Outcome of our “Freaky Story”:

This is a big decision with a lot to consider and this story is not over yet. Armed with a good discussion about the top 5 considerations, the advisor is better equipped to think things through.

“You always have options when making Broker/Dealer decision. The trick is understanding those options.”

This advisor has never been a business owner and he’s not so sure that he wants to be alone in an office. Having the higher payout sounds great! It’s almost three times what he’s earning now and his net revenues, even after expenses will almost double. He would have the liberty to travel between California and Colorado, earn more, keep more, own his book of business and even receive a six figure transition bonus from an independent broker/dealer to make the move. But, sometimes pros can be the same cons that keep you from making the jump.

Other options:

We discussed another option to consider, joining a local team of independent financial advisors in Colorado where he can meet his clients as well as provide him the ability to travel. The concept was great but unfortunately it didn’t turn out to be so positive after he met a few of the offices.

It’s almost a Goldilocks story…

  • One office wanted to give him a 40% pay out to cover office expenses! He couldn’t believe it, it would cost him roughly the same that he was giving up at his wirehouse firm to join this office.
  • His second visit to another local independent firm was a little better at an estimated payout of 80% but it wasn’t the ideal location for him. Seemed great overall with the right technology, service and support but felt the location wasn’t what he was hoping for- and wasn’t so sure of the potential synergy he would have with the other team. The office was filled with insurance agents and producers, whereas he was a 100% fee based advisor.
  • The third office was in the right location, had the right amount of service, receptionist, technology, support, a bigger check than the other three to move over- but had zero office space. He would be working in a cubicle one building down by himself.   While the third scenario was probably the better solution for him, it still wasn’t the ideal situation that he had envisioned.

Next Steps:

This story is to be continued because he is still in the process of searching and we will keep you posted in future articles…but the great thing for him is that he’s not alone. He called us at RepRecruit, and we are working all of his options, all his angles, vetting out broker/dealers, local offices and other opportunities for him-full time and at no cost to him or his future deal. He can continue to focus on taking care of his clients, finish up moving his furniture, life and fiancé in their new home while still reviewing the options that we present to him daily.


The Moral

You never know what type of situation you may find yourself in with your firm.

This isn’t an Urban Legend “it happened to a friend of a friend of mine” story. It’s real and “stuff” like this happens every day.

Regardless of whether you are with a wirehouse firm, a bank or an independent broker/dealer- you should always have a Plan B to exit your firm quickly if the occasion should ever arise.

Independent recruiters like us at RepRecruit, live and breathe the broker/dealer market. At RepRecruit, we do not work for broker/dealers. We work for you and have your best interest at heart. We take your career as serious as you take your clients portfolio and will never stop working for you.

Call us today (661-226-0099) to share your “freaky story” and learn more about your options. It’s what we do and we’d love to help.


Considering a Broker Dealer Change? 7 Critical Details

This document is about deciding whether or not a Broker/Dealer move makes sense for you.


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