Transformation

Why Teams Are the Client of the Future for Broker-Dealers

Why Teams Are the Client of the Future for Broker-Dealers

August 2015

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To remain competitive in today's financial advice industry, broker-dealers must recalibrate their relationships with their advisors, according to a whitepaper released by Pershing LLC, a BNY Mellon company

In Brief — What You Need to Know in 30 Seconds

  • The top client of today’s successful broker-dealer is not a “rep” or even an “advisor” but a “firm,” or a team with multiple professionals, its own identity and leadership team and an ambitious strategy to continue growing.
  • Ensemble teams are already controlling a significant percentage of the revenue of broker-dealers, growing faster than the average practice, servicing a higher-net-worth client base and offering better careers.
  • The combination of high productivity with the increasing use of the team structure suggests that as much as one-third of all revenues inside broker-dealers are controlled by teams, and further, that is the revenue that is growing the fastest.
  • The traditional affiliation models in the broker-dealer industry have been set up for individuals and not necessarily for firms, and as a result, ensemble firms can feel like an awkward fit with the culture of the organization.
  • In order to work productively with firms, broker-dealers have to rethink the way they communicate to firms. The relationship with a firm should resemble a business-to-business relationship in the way it is structured but still retain some of the personal touch that creates a long-term partnership.
  • The modern broker-dealer should be seen as a resource hub that provides packages of pre-selected and pre-integrated building blocks for advisors to use in building their business. Such building blocks include investment platforms that combine custody, trading, reporting and billing tools, as well as traditional brokerage products that may round out the portfolio of a client.

Executive Summary

The financial advice industry is rapidly evolving, presenting broker-dealers with an opportunity to prosper by recalibrating their relationships with their advisors. Successful and ambitious advisory firms are emerging across the country, and they’re poised to be the future of the advice industry. These larger, multi-professional teams (“ensembles”) have a great track record—they’re growing faster than their solo-practitioner peers, they’re achieving better financial results, and they attract superior clients while consolidating smaller, aging practices. Broker-dealers can recruit these ensemble firms or retain large in-house teams, but either way they’ll be positioned to flourish if they offer the sophisticated advice services demanded by high-quality clients.

Ensemble teams are already controlling a significant percentage of the revenue of broker-dealers, growing faster than the average practice, servicing a higher-net-worth client base, and offering better careers.

Pershing

How can you position your firm to become the broker-dealer of choice for fast-growing teams?

Today, roughly one third of all advisors already belong to a team1—and with good reason. Large ensembles grow faster, achieve superior financial results and attract bigger client portfolios than solo practices.2 The trouble is, many affiliation models still revolve around individual reps. How can you position your firm to become the broker-dealer of choice for fast-growing teams?

Why Teams Are the Clients of the Future for Broker-Dealers chronicles the growth and success of advisor ensembles. It also offers a roadmap for broker-dealers looking to attract and retain elite teams—from building stronger cultural connections to placing a greater emphasis on thought leadership. The study discusses:

  • Three key reasons why teams generate 12% more revenue per person than individual advisors3
  • The striking correlation between team size and client portfolios
  • Why ensembles are the fastest-growing advisor businesses—but also the most vulnerable to attrition
  • How to reimagine broker-dealers as “resource hubs” and sources of capital for top-performing teams
  • Ideas for retooling affiliation models, from optimizing payout grids to recognizing all members of a team
  • The diverse types of large teams—and how to work with each more effectively

 

DOWNLOAD THE FULL PAPER

1 WealthManagement.com 2013 Compensation Survey
2 Investment News Financial Performance Study, Pershing LLC, Sponsor, 2014.
3 Ibid

The whitepaper has been designed for informational purposes only. The services and information referenced are for investment professional use only and not intended for personal individual use. Pershing and its affiliates do not intend to provide investment advice through this whitepaper and do not represent that the services discussed are suitable for any particular purpose. Pershing and its affiliates do not, and the information contained herein does not, intend to render tax or legal advice. The accuracy, completeness and timeliness of the information contained herein cannot be guaranteed. Pershing and its affiliates do not warranty, guarantee or make any representations, or make any implied or express warranty or assume any liability with regard to the use of the information contained herein. Pershing and its affiliates have no duty, responsibility or obligation to update or correct any information contained herein.

©2015 Pershing LLC. Pershing LLC, member FINRA, NYSE, SIPC, is a wholly owned subsidiary of The Bank of New York Mellon Corporation (BNY Mellon). Trademark(s) belong to their respective owners. For professional use only.