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Realistic Ruminations on Broker-Dealers [Episode 12]

Episode description

This episode is, as the title suggests, all about broker-dealers. And more specifically, Matt and Micah draw from personal experience to allow listeners to gain their perspectives on the issue. Because both have worked with broker-dealers closely in the past, they know the ins and outs of what to look for in the partnership. They highlight some of the pros and cons to assure listeners that there are many factors one has to weigh in order to make the decision that makes the most sense for your firm: either parting ways or sticking with a broker-dealer is a matter of monetary concern as well as a qualitative concern for your clients.

The pros to working with a broker-dealer are as follows: a BD takes care of all of the compliance in your practice, so that all SEC and FINRA rules are followed. This frees up a lot of time and effort on the part of the business owner, who doesn’t have to deal with a lot of the busywork, shopkeeping duties like: email archiving and proper file storage. Working with a BD also looks good when dealing with auditors; you can avoid conflicts of interest that way. On the other hand, some of the cons of a BD include: you have to keep a record of your own stuff anyways. So, as Micah points out, you are working with duplicate systems: the BD backs up your files, but doesn’t guarantee that you will have access to them if you part ways or an emergency happens. So, with duplicate systems come duplicate costs. In addition, another con is that the cost can be steep enough to warrant your consideration of severing any ties completely. And with that, there are many other elements to weigh, but these are the biggest that are brought up in the episode.

To end the episode, Matt and Micah provide some actions points for listeners: Create a contingency plan. This means that one should always be prepared for emergencies and should plan for the possible severance of relationship with your broker-dealer. Establish vision between firm and BD so that there is transparency in communication. Measure total monetary and potential qualitative cost between you and your BD. And lastly, Reach out to a custodian bank for the purpose of getting your feet wet and finding out what it’s like on the other side (Micah endorses Charles Schwab).

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