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Why Financial Advisors Are Flocking to Private Broker Dealer Firms

Why Advisors Are Flocking to Privately-Owned Broker Dealer Firms

By Mrinalini Krishna April 1, 2019
Financial Advisor IQ recently interview Derrick Friedman, present and found of Broker Dealer Change.

Advisors are increasingly looking for opportunities at privately-held broker-dealer firms, recruiters say. Though not the sole determination for a switch, concerns of overemphasis on shareholder interests versus their own interests, and dissatisfaction with service are some reasons prompting advisors to seek out non-publicly traded companies.

“The financial advisor wants to feel important. They don’t want to feel like they’re a number,” says Derrick Friedman, president and founder of Atlanta-based recruitment firm Broker Dealer Change. “They want to have that freedom to do their own thing irrespect[ive] of what the shareholders in the company want for their own money-driven purpose.”

“I think sometimes when you’re in a publicly-traded company, the desire for shareholder returns can sometimes make advisors feel a little less certain about where the firm is going,” Katherine Mauzy, principal of Financial Advisor Talent Acquisition at Edward Jones, told FA-IQ in February. Edward Jones operates on a partnership model.

And that uncertainty is driving advisors to consider opportunities that give them a perception of keeping their interests safe — at privately-held firms.

Advisors tell Jodie Papike, president of recruiting firm Cross-Search, that they would like to move to a privately-held firm because they “feel that if they know the owners of the company, that they’re going to treat them right, and they’re going to make decisions based on [the advisor’s] needs.”

As a privately-held organization, his firm is appealing to advisors, says Brian Kovack, co-founder and president of Kovack Securities, a Fort Lauderdale, Fla.-based mid-sized independent broker-dealer.

For publicly-traded firms, there’s shareholder pressure to “squeeze revenue and cut expenses to create higher EBITDA,” says Kovack, who says being a privately-owned company absolves them of such pressures.

“We’re focused on the long-term, treating advisors the way we would want to be treated and most importantly looking out for their customers,” says Kovack.
On their part, large stock-exchange listed firms do try and soothe advisor anxiety.

“We invite all interested financial advisors to our monthly FA due diligence meetings at which they can meet directly with our most senior leaders for transparent, open dialogue and learn about the advantages of size and scale in a company proud of its regional roots,” Wells Fargo told FA-IQ.

Papike says making a transition to another firm is a “complex process” for advisors and involves a lot of questions about why they are unhappy with their present situation and how a new firm can fix those “pain points.”

She says one of the top reasons advisors come to her is because they are unhappy with the service they receive from their current firm. In an environment of mergers and acquisitions of broker-dealer firms, long-term stability is also a concern.

“Their perception is that if they go to a privately-held firm, they’re somehow going to get better service, or they won’t be sold again, there’ll be long-term stability. So, it’s not just ‘Oh, I want a privately-held firm’ — it’s for a purpose, it’s to make sure that the structure will stay longer-term in their mind, or that they’ll get better service,” Papike says.

Friedman agrees. “You lose the personalized service when you get into publicly-traded, corporate firms,” says Freidman.

Kovack owns 45% of his firm while his father owns the remaining 55%. He says with succession planning, his father’s ownership will eventually make its way to him and he plans to remain in the business. “We’re not for sale. We will remain privately owned,” Kovack says.

But advisors needn’t blindly opt for privately-owned companies, warn others. The “devil is in the details,” says Danny Sarch, president of White Plains, N.Y.-based Leitner Sarch Consultants.

Certain firms are a good fit for certain advisors, he explains, but advisors must decide based on where they can best do their business. >>Read More

Posted in: Independent Broker Dealer News

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Financial Advisor Recruiters Update

Financial Advisor Recruiters Update

Financial Advisors bolt from Waddell & Reed

The broker dealer lost 56 brokers & financial advisers in the third quarter, and not all of them were low-producers the firm wanted to shed

Financial Advisor Recruiters News Update:

According to Bruce Kelly, reported on Investment News, October 31, 2018 – Waddell & Reed Financial Inc. lost another 56 brokers in the third quarter, as senior management continued to stress its strategy of shedding low-producing talent and building the firm around its most productive advisers.

For the 12 months ended in September, Waddell & Reed lost 407 reps and advisers, a decline of 27.5% from the previous year. The firm now has 1,074 advisers.

The minimum annual fees and commissions the firm has set for its advisers to generate is $125,000, noted Shawn Mihal, president of the firm’s broker-dealer, during a conference call on Tuesday with analysts to discuss company earnings. The average adviser leaving Waddell & Reed produces $112,000 in fees and commissions, or less than the company target.

Management at the firm this year has said that it was focused on retaining high-performing financial advisers, but some large teams also left over the summer. Read More>>

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Online Clients Can Purchase Access to Financial Advisers

Betterment is making its team of human financial advisers more accessible to smaller accounts.

Betterment clients can purchase one-time access to “human” financial advisers.

For a flat fee, users can receive guidance on major life events from a “human” financial advisor

Reported by Ryan W. Neal, Investment News, September 12, 2018



Broker Dealer Change, a Financial Advisers Recruitment Firm shares a recent report from Investment News. Ryan Neal reports that “Betterment is making its team of human financial advisers more accessible to smaller accounts. The digital advice platform now offers “advice packages” to investors looking for one-time guidance for a flat fee. Any investor can purchase a package — which includes an actionable financial plan, educational content and a call with an adviser — effectively opening up Betterment’s certified financial planners to clients who either don’t meet the investment minimum for Betterment Premium, or don’t want to pay the additional fee. The packages are themed around common events in an investor’s financial life: getting started, financial checkup, college planning, marriage planning and retirement planning. Price varies per package, with the New York Times reporting the “getting started” package costs $149 while retirement planning will run $399. A Betterment spokesperson told InvestmentNews those prices aren’t set in stone yet, and Betterment senior financial planner Nick Holeman said the company will consider launching more packages in the future based on customer demand.”  Read More>>>

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