True Independence Is Not Out Of Reach
Though It May Not Be The Best Solution
List Of Broker Dealers We Have For Sale
SIPA Members often ask for any information we might have regarding the relative merits of "Going Independent" versus staying an employee at a firm. In talking with advisors - be they RRs, IA's or FPs, a more significant question has emerged. There seems to be a tremendous amount of misinformation out there - and the question is fundamental to any sort of real consideration of the relevant issues. Recently, we spoke with affiliate company The Broker Dealer Exchange (a company that provides services to those considering the move to independence). The following is a summary of that conversation. The question is:
What do YOU mean by "Independent"?
Seriously. The reason this question needs considerable thought is that there is a tremendous amount of confusion and uncertainty with regard to the basic scenario faced by most. Why is there a misunderstanding? Well, this is partly due to the fact that this exercise will typically be a once-in-a-lifetime event - and so, many good folks just don't have the answers. But complicating matters is the fact that there is basically zero serious coverage of these issues in the popular financial press. Worse, however, is that what is presented is often biased and misleading. Case in point: when the major magazines talk about independence, the conversation is almost universally confined to the concept of becoming an independent rep at a bulge bracket or regional firm. While that is an interesting discussion, it is a far cry from the meaning of independence - that is - no being beholden to anyone - i.e. owning your own Broker Dealer or Financial Advisory.
Think about it - endless articles on "going independent" and next to nothing about running your own firm. The very concept of running your own firm is subtly portrayed as simply out of reach of mere mortals. Advisors are encouraged in the media to consider keeping their own offices, expenses, etc, as an independent rep of a bulge bracket firm - but are rarely exposed to the concept of owning their own firm. How can this be? There is bias in the popular press, and it works like this: magazines are run off of advertising and sponsorship dollars. And only the major firms can afford to spend the significant cash involved in a meaningful national ad campaign. And just about every publication realizes this, and acts accordingly. They know exactly where their bread is buttered, and will never give an honest hearing to this issue. Nevertheless, the fact remains:
Owning and operating your own practice (true independence) is likely within your reach.
It may not, however, be the best idea given your particular circumstances. But to set straight the record, filing to create your own broker dealer is burdensome - but not out of reach of mere mortals. And if you out - source the entire process to a compliance consultant specializing in these services (the start up of Broker Dealers) you can expect to pay somewhere between seven to fifteen thousand dollars to get through the process. A lot of money, to be sure, but not out of reach for most successful advisors. Then again, if you wish to Buy an existing Broker Dealer - one that is totally clean and has never done business (yes, this is possible) the cost is somewhere in the range of $50K - but there are ways to do it that would allow you to be in business immediately (in as little as three days), so there can be some reasons for this, depending of circumstances. And what is the amount of capital required? Well this depends on the business you intend to conduct. But the vast majority of FINRA firms are $5K net Cap firms - meaning that the requirement is five thousand dollars. Again, not out of reach. Filing your own investment advisory can be even cheaper. Outsourcing the process at the state level (if you manage less than $25M client dollars) is inexpensive; usually less than $2500. Triple that for SEC registration, if you manage more than $25 Million.
So there you have it; the brass tacks. You may be much closer to owning your own firm than you think. That being said, your circumstances are unique - and owning your own shop may not be the right solution. But you should know that it is a realistic possibility - despite what the major press might have you think.
For a more in depth discussion of these issues, please visit affiliate company "brokerdealerexchange.com" for a free consultation. Get the facts - so that you can make the appropriate decision based on your relative factors.
The Broker Dealer Exchange is a leading financial services acquisitions intermediary, specializing in buy and sell side advisory in the purchase/sale of Broker Dealers, Books Of Business, etc. BDX is a neutral third party intermediary, and is distinguished by a staff with real track records in the broker dealer compliance/ financial services space. We are an affiliate, in that we direct requests for purchases of assets or Broker Dealers to the BDX. (List of BDS we have for sale via Broker Dealer Exchange)
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