Which financial partner is right for you?

Once you agree that it makes sense to add financial services to your practice, you need to decide which financial partner is the best fit for you and your clients. First, you must identify the types of firms available and learn what to look for in the firms you are considering.

Which type of firm is best?

To determine which firm is best for you, it is important to gain an understanding of the types of firms in the investment planning arena.

Choices include:

• Joining a wirehouse or regional broker/dealer firm
• Affiliating with an independent broker/dealer
• Becoming your own Registered Investment Adviser (RIA) firm

Wirehouse broker/dealer firms

Wirehouse broker/dealers are the national, full-service, New York-based stock brokerage firms. Their financial advisors, who are direct employees, have access to a wide range of investment products from their many branches, as well as from other firms and brokerage and commission houses; however, their products are proprietary, meaning that wirehouse brokers are limited to only the standard company offerings. Once considered the primary choice of brokers, since the last quarter of 2008 many wirehouses have either failed or downsized, losing some of their luster, making regional and independent broker/dealers more attractive to brokers back in the job market.

Regional broker/dealer firms

Similar to the wirehouses in operation, but weaker in financial clout and national scope, regional broker/dealers are full-service brokerages whose offices are located within a specific region. Like the wirehouses, regional broker/dealer advisors are employees, and their financial products are proprietary. Advantages over the wirehouses may include a more personal touch and a haven from the tarnished image that the larger firms have acquired since the 2008 financial crisis.

Independent broker/dealer firms

In contrast with wirehouses and regional broker/dealers, advisors affiliated with independent broker/dealers are not employees. Instead, they are self-employed, independent contractors with the freedom to change their affiliation to a different broker/dealer as desired. Also known as IBDs, these firms are not limited to the proprietary investment portfolios that can hinder the brokers at wirehouse and regional firms. Although advisors for independent broker/dealers are responsible for such expenses as office rent, computers and other necessities, they also enjoy higher payouts; however, the amount of training and support offered to advisors varies between firms, and may be very limited.

Registered Investment Adviser (RIA) firms

RIA firms are registered directly with the Securities and Exchange Commission (SEC) to provide investment advice and management, usually offering services through Investment Adviser Representatives (IARs) who are affiliated with the RIA firm and not direct employees. Unlike the traditional brokerage firm, the RIA has a fiduciary responsibility to its clients, which requires a high standard of disclosure and due diligence, including disclosing up front any potential conflicts of interest. RIAs are typically compensated on a fee basis instead of a commission basis, with most clients being individual investors.