Independent Broker Dealers

Advisors who want to have their own brand will often affiliate with a broker/dealer with an offering for Independent Advisors. Most commonly, the Firm will be dually registered as both an RIA and Broker/Dealer, offering a wide array of products for the Advisor to choose from.

It is worth noting that many Firms offer both an employee Advisor path as well as an independent offering, creating some overlap in the names associated with each category. This practice is starting to become more common, a trend that is expected to continue.

  • By definition, Advisors will be 1099 independent contractors of the IBD. However, some Advisors may choose to affiliate with a local OSJ branch and could work as an employee of this entity as well as in an independent contractor capacity with the IBD.

  • Advisors are 1099 contractors of the broker dealer and earn a percentage of their revenue generated. This payout will be subject to a payout grid that increases with the production of the Advisor's business. Payouts may start around 60% for smaller Advisors and quickly increase with production, typically capping out at around 85 - 90% around $500,000 in revenue and 90-95% at $1,000,000.

    This gross payout will not cover the Advisors expenses, many of which are required to do business with the broker/dealer, including errors & omissions insurance, affiliation fees and client account fees. As a rule of thumb, the gross payout should be expected to be decreased 5-10% after accounting for this cost.

    Independent Broker Dealers typically will offer a transition bonus to Advisors that typically range from 25 - 100% of the Advisors trailing 12 months of revenue. These bonuses will be structured as forgivable loans that require the Advisor to stay with the Firm for 3-10 years to be earned completely.

  • The Advisor will own their client lists and business relationships with the broker/dealer having no ability to inhibit the Advisor from transitioning them to another Firm. Transition bonuses, however, must be repaid for any unforgiven loan amounts should the Advisor not complete the service requirement in the contract.

  • Advisors may either join an existing OSJ branch and use their branding or create their own and operate as their own independent business entity. Many IBDs offer a "house brand" that Advisors may operate under, although this is usually a matter of convenience and does not affect the Advisors business in any other way.

    • Total control and ownership of the business.

    • Significantly higher revenue payouts than wire houses and banks.

    • Broadest selection of investment products available for clients to choose from.

    • Advisors may easily engage in outside businesses.

    • Advisor responsible for all business expenses, most notably office space and staff.

    • Some Firms will force additional costs on the Advisor and charge them to use various platforms and services separately.

    • Advisor will be subject to compliance approval on marketing activities and report to the IBD for compliance.