How Independent Advisors Can Choose the Right Broker-Dealer

Being an independent financial advisor allows you more freedom and opportunities to build the business you want for today and into the future. From how you serve and advise your clients to how you operate your practice and build your team, having more independence means having more control. However, without the right partner to support your chosen business model and practice structure, having more control can feel like having more challenges.

How Do I Find the Right Partner?

As a financial advisor, you want to focus on what you do best – taking care of your clients. To do that, you need a strong broker-dealer that understands your needs, supports your day-to-day operations, and is the best fit for you. By understanding what a broker-dealer values – through the capabilities and solutions they deliver – you’ll discover what you need to build your business the way you want to while serving your clients and their unique needs.

If you’re searching for a new wealth management partner, here are some factors to consider when switching broker-dealers and evaluating their value.

• Do they offer the flexibility and competitive payouts I'm looking for?
• Will I have greater control over my expenses?
• What industry-leading capabilities do they provide to help me broaden my services, deliver personalized advice, and grow my business?
• What tools and technology do they offer to fuel growth, profitability, and efficiency in my practice?
• How will they support me in realizing my goals while helping my clients realize theirs?

Choosing the Best Broker-Dealer is Key to Practice Success

As the financial industry evolves to meet the complex needs of investors, independent advisors must mitigate practice challenges to stay competitive. Pain points still linger for advisors who pursue independence for more control, yet fear being overwhelmed with all the responsibilities that running a business requires, including risk management, compliance, and regulatory reviews.

For Financial Advisors Going Independent, It Pays to Be Selective

Choosing the best broker-dealer (BD) firm or custodian for your business is crucial – as is taking the time to consider and weigh your options. Depending on the type of independent advisor role in which you operate (i.e., registered investment advisor (RIA), hybrid RIA, retirement specialist), the right broker-dealer partnership will look different for each advisor.

Eric Oatman, a wealth manager at SEI Wealth Management who transitioned to LPL Financial in 2024, shared this advice when considering moving broker-dealers: “Do your homework. Do your diligence. And when you make the decision to transition, do it 100%. Do it 100 miles an hour and get it done. You'll be rewarded by your clients for doing that.”

While multiple factors should go into your decision, there are some key characteristics all broker-dealers should share. The goal of your BD should be to help you feel empowered, not limited.

As you complete your due diligence, below are some things you should be looking for from a broker-dealer:

• Tailors their services to your chosen advisor business model
• Provides sufficient levels of scale and resources to support you and your team
• Effectively communicates and understands your practice’s values
• Limits drawbacks and amplifies the benefits of being an independent financial advisor

How to Find the Right Broker-Dealer to Match your Practice’s Purpose

The wrong broker-dealer relationship can have a negative impact on your business’ success, and not just from a financial or operational standpoint. It can negatively affect your ability to reach your practice’s potential, hurt your ability to connect with clients, or even hinder your own personal fulfillment – regardless of the flexibility and freedom of your business model.

Choose a partner that understands, supports, and is aligned with your values and practice culture. While you may not be able to source this information entirely outside of an independent broker-dealer evaluation, you can get a sense of a potential BD’s fit through preliminary discovery, including:

• Reaching out to industry professionals, recruiters, and affiliated partners of each broker-dealer and asking about their experience with each firm.
• Reviewing positive and/or negative feedback to get a sense of each BD’s reputation and track record with financial advisors and affiliates.
• Reviewing each broker-dealer’s website, marketing materials, and mission statements to get a sense of each BD’s values and their recruiting strategy.
• Understanding the recognition, awards, and accolades that a firm has received. Learn more about LPL’s recognition as one of Newsweek’s most responsible companies.

Ask Not What You Can Do for Your Broker-Dealer – Ask What They Can Do for You

The process of identifying the right broker-dealer partner can seem overwhelming. However, by focusing on core capabilities and asking specific questions about how those features can benefit your financial business, you can confidently compare firms and be better positioned to choose the right firm for your business.

As an independent financial advisor, regardless of which broker-dealer you choose, you must feel confident in their ability to help you stay competitive. If your BD can’t give you access to the valuable tools, expertise, and support that financial advisors of similar size and scale are accessing, your practice will struggle to retain and attract clients.

A strategic partnership can elevate your practice potential and increase your client outreach. And, as previously mentioned, you can determine which broker-dealer is right for you by identifying your business needs and asking direct questions about their capabilities in the following key areas:

Advanced Technology, Tools & Platforms

Why is it important to discuss financial technology with your broker-dealer?

Adaptive, flexible financial technology is more than a “nice-to-have” asset – it is a necessity to help you keep up with market changes and the rapid pace of digital trends. If reliable technology is not updated and well maintained, it quickly becomes obsolete and limits essential integrations for your clients. Choosing a partner that makes significant investments in their advisor tools and investor technology helps you streamline your business and increase your value to your clients.

Important questions to ask a broker-dealer about their technology innovation and operational services:

• Can you demonstrate your current tech capabilities and how they support and integrate with best-in-class reporting tools and platforms?
• As a broker-dealer, what technology capabilities are you investing in for the future?
• How can your digital platforms help my financial advisory practice increase efficiency while remaining cost-effective?

Keep in mind, some firms may offer a variety of services depending on your desired level of broker-dealer involvement (i.e., account admin, advisory oversight, regulatory compliance, and clearing services communications). RIA firms or fee-based advisors should get clarity on the quality of management around tech communications and whether a broker-dealer’s technical capabilities can keep up with the size and scale of their practice.

Service & Support (Including Broker-Dealer Transitions)

Why is it important to inquire about the type of access and dedicated support a broker-dealer provides? 

As a financial advisor, you should feel confident in relying on your broker-dealer as a one-stop-shop for anything you need to grow your business, including:

• Client service teams who serve as a direct extension of your staff and can address your needs quickly and efficiently.
• Research insights to help you stay on top of trends and effectively guide clients, particularly in times of market volatility.
• Marketing expertise that can help you attract and connect new prospects to your independent practice to grow your client base.

Why is a broker-dealer’s transition support so crucial to your business success?

During a broker-dealer transition, your business may be changing, but your clients still need your dedicated attention. Sometimes, the challenge of transitioning and re-papering can be the reason advisors choose to stay with their current broker-dealer and inhibit their future growth. Concerns for your practice, employees, and your clients can sometimes over-shadow the need to move forward with a new BD.

With the right firm, you’ll be able to see challenges as new opportunities and be better able to navigate those challenges as they arise. A firm that recognizes your day-to-day commitments, and the need for minimal disruption, is crucial. The right partner will recognize the importance of communicating and respecting your practice during a time of transition and help you stay committed to serving your clients throughout the process.

Business Consulting & Open Architecture Flexibility

Why is it important for financial advisors to know the process and intention of their broker-dealer’s consulting capabilities?

Your broker-dealer should be dedicated to helping you reach your business goals and providing quality insights catered to your business’ needs, now and into the future. Regardless of your advisor focus – and whether you’re a RIA vs. financial advisor, or a small-scale practice vs. a multi-client firm – you’re helping investors make big decisions. Knowing how you need to adjust, pivot, or better serve your clients requires quality data from knowledgeable, consultative specialists.

Why is a broker-dealer’s current and future open architecture key to an advisor’s business planning?

Understanding your broker-dealer’s open architecture framework and how their offerings work for your business is pivotal to how your firm can grow and evolve. Open architecture affects more than client portfolio potential. It affects your practice potential as it relates to client outreach, your ability to transition to new business models if necessary, and your ability to optimize your strategy through new products or client-based service offerings.

Make sure you’re clear on what’s available from your broker-dealer regarding flexible business models, their financial stability, and if their access to capital fits your current needs and future business objectives. Start thinking about how your current broker-dealer’s open architecture and support has positioned your practice so far, and how you will need to be positioned in the future, by asking yourself some key questions:

• What are my main pain points or frustrations with my current firm?
• Can I meet my clients’ needs or do I find myself feeling limited by my current firm’s lack of flexible offerings?
• Is it difficult to attract new clients or do I lack confidence in retaining my current clients?
• Does my BD keep me updated on new offerings that could improve my client service and their experience?
• Does my BD provide both qualitative and quantitative data for my business with consistency and clarity?

The answers to these questions can help advisors understand the service gaps they currently have and assess how, and if, their current firm can provide solutions.

Financial Stability & Access to Capital

How does my broker-dealer’s financial stability and overall industry reputation affect my business in today’s market?

Past financial crises have caused massive shifts in how advisors viewed broker-dealers and larger firms. These shifts have led many advisors to transition to an independent advisor model – a trend which is still heavily present in today’s financial world. Investors think more intently in how they find trusted financial advisors to guide and direct their wealth plans – and advisors may apply that same approach when choosing their broker-dealer or custodian. Assessing a firm’s strength and stability, and their reputation for how they distinguish or promote themselves in the industry, matters in the short and long term for advisors.

Why does a broker-dealer’s future financial plans and philosophy affect an advisor’s practice?

While smaller, newer broker-dealers may present unique benefits for your current firm, they could also pose challenges in the future. With more consolidation occurring through RIA mergers and acquisitions and large firms joining in partnerships with smaller firms, it’s essential to understand your BD’s business goals and viability for the future. Significant growth is a crucial aspect of business for most advisors, and it often requires investment.

A broker-dealer should be able to meet you where you are, but also have the scale and capabilities to get you where you want to go. A firm that can support your growth with access to capital allows you to make more strategic investments that help you position yourself for future opportunities to grow. Should you choose to implement a succession plan or sell your financial business, the right partner is essential in helping you realize the full value of your practice.

Choose a Broker-Dealer That’s Committed to Your Vision for the Future

Aligning with the right broker-dealer for your practice is essential in helping you keep your business competitive while optimizing every aspect of independence. With the partnership of a BD that respects your business’s goals and provides the right resources and support to help you attain those goals, you can continue growing with confidence at every turn.

If you're considering a move to a new firm, check out the six key steps to finding the right financial partner.