For the broker-dealer
provisions to be applicable, the statute requires the taxpayer to be a registered securities or commodities broker-dealer
, as defined to mean a broker or dealer registered as such by the Securities and Exchange Commission (SEC) or the Commodities Futures Trading Commission (CFTC).
If you bring up this model to a broker-dealer
executive or staff member that has a standard payout grid to advisory business, heated opinions will likely start to roll off his or tongue: "That model is not profitable," or "That firm has been looking for a buyer for years but no one wants them because they aren't profitable," or "How can they offer 100% on advisory if they are liable for the risk?
Many larger teams are departing broker-dealer
firms to become independent.
For example, a clearing firm commonly charges $1 for postage and handling fees, and the broker-dealer
charges between $4 and $7.
Chief among them is the fact that if a client's bond portfolio is constructed with bonds from a broker-dealer
, the client likely will pay more for the bonds because of higher markups attached to such bonds.
This minimal approach is by far the most service-friendly, as advisor touch points stay within their own broker-dealer
and culture remains intact.
On recruiting, the study reported that over the last five years, competition for top advisor talent has led to sharp increases in recruiting bonuses and higher payouts for recruits, but the "winners" in those highly competitive recruiting wars may in fact be losers over the longer term, since those incentives "may cause permanent damage to the economics of the winning broker-dealer
A registered investment adviser has a fiduciary responsibility to work in the client's best interest; the broker has a fiduciary responsibility to the broker-dealer
When a banking organization conducts securities activities outside the bank, through a subsidiary or an affiliate that is a broker-dealer
, it is subject to the jurisdiction of both the banking agencies and the securities regulators.
The advisor went to the president of the broker-dealer
, who assured him that everything was fine, that they had not lost numerous reps and all was in excellent order.
He shared a story about the president of his former broker-dealer
who seemed fixated on pleasing upper management of the insurance parent company.