- Identify ways your firm can avoid "commoditization": In the past, advisors affiliated with broker-dealers to satisfy a supervisory requirement and to have access to better technology. Since then, regulation and competition have made the requirement less relevant, while technology and the markets have commoditized solution access and, in some ways, broker-dealers. Three-quarters of advisors say that their broker-dealer is less than effective at communicating their value. The broker-dealer of the future uses everything at their disposal to retain talent and drive recruitment, while creating a richer value proposition for advisors.
- Foster organic growth: Most broker-dealers devote their attention and budget to acquiring new talent. Yet organic growth may offer a return up to six times higher. Forward-thinking broker-dealers continually look for ways to enrich and maximize existing relationships.
- Establish a sound economic model: Ballooning bonuses, higher compliance costs and growing technology investments are squeezing margins tighter. High payouts may not be sustainable, often hurt profitability, and may lead to spiraling increases as broker-dealers set out to recruit or retain advisors. As a result, the broker-dealer may be challenged with profitability, even if recruitment and retention efforts are successful.
- Avoid the winner's curse of high-cost recruiting: Faced with a fiercely competitive market, a broker-dealer can spend seven years' worth of profitability to attract and bring in the best recruit. However, high-priced recruits tend to have shorter tenures—averaging only three to five years— so a myopic focus in this area can be costly.
- Espouse advisory services: The broker-dealer of the future sees over the horizon, conducting itself more like a large RIA than a large broker-dealer. By offering advisory services as part of its organizational core, broker-dealers can build a profitable and integrated service model that blurs the historical line between brokerage and advisory businesses.
- Demonstrate stability and longevity: Top advisors place a high value on stability and a sound risk culture and want to affiliate with broker-dealers who proudly demonstrate their commitment to these attributes. The broker-dealer of the future is a firm known as the financially sound and prudent firm.
Pershing Identifies Six Transformations Elite Broker-Dealers Use To Outperform Peers
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