Brokers Transition to Smaller,Independent Firms


Investment advisors and brokers continue to go independent, and they are taking more assets with them when they leave their firms, according to an InvestmentNews article by Lavonne Kuykendall entitled “When going indie, advisers take more assets: Fidelity,” which cites Fidelity Investments’ 2011 Broker and Advisor Sentiment Index.

Those who recently switched firms told Fidelity they took 70% of their client assets with them, compared to 61% in 2008. Of the 6% who were likely to switch firms within a year, 63% said they planned to switch to an independent business model. Over 50% of respondents said the independent business model had the highest earnings potential under present economic conditions. Fidelity also reported that more large teams are switching firms.

Discount brokerages like Schwab and TD Ameritrade have benefited the most from the increase in independent brokers. Their fee based services to independent advisors and other businesses have increased phenomenally.

The upside is a financial planner or registered investment adviser can play to his strengths while shopping for the best investments the world has to offer for his clients. Alliances with discount brokerages can also work in both directions. When customers need help with investing, the discount brokerages refer them to the independent brokers.

The downside is an array of potential legal problems. Employment contracts, customer list disputes, bonus loan disputes, confidential information restrictions and non-compete clauses may need to be examined by an experienced attorney.

Page Perry is an Atlanta-based law firm that has helped a wide variety of clients with employment law concerns. The firm’s employment law services range from drafting or advising clients about employment agreements and related documents to litigating or arbitrating employment related disputes in the securities and financial services industries. For further information, please contact us.