By Jason Stone

If you are unhappy or uncertain about your current broker-dealer relationship and want to evaluate the possibility of a new firm, there may be good reasons to expand your search. The right partner may not be a broker-dealer. It may be a branch organization within one.

The key is to find a “right-sized” relationship. But the selection of firms in that “Goldilocks zone” (not too big, not too small) is shrinking rapidly. You might find that the best choice for you is an organization within an organization.

One of the most common desires we hear from advisors is to have a relationship where their business is big enough to be important to the firm. That’s the sales pitch you hear from small broker-dealers. They promote their personal service and boutique feel.

But there are big risks and disadvantages to joining a small firm. Running a broker-dealer is a business of scale. Margins are thin. If the bear market we are experiencing continues, cash flow can become a real issue. Small firms cannot successfully negotiate with vendors to get you good discounts on the services and technologies you may need to run your business. They may not have the resources to keep up with technology and regulatory requirements.

That’s why there are fewer and fewer smaller firms. They are being acquired by larger firms with economies of scale and buying power. Many of the inquiries we receive are from advisors whose firms are being acquired. If you join a smaller firm for the service, there is a very good chance you will end up as part of a larger firm sooner rather than later.

Larger firms are not a panacea. They provide stability and potentially better pricing. But it is harder to have a personal relationship and get the service you are looking for.

Another option is to consider branch organizations (Offices of Supervisory Jurisdiction or OSJs). Many, like TAG Advisors, are the size of a small broker-dealer with the advantage of being part of a much larger firm (in our case, Cambridge Investment Research Inc.). Larger branch organizations have dedicated operations teams and transition specialists. They can expedite issues when things don’t go exactly right and coach you through moving your business. They have the scale to carry much more weight than any individual advisor’s business and so they have clout with the broker-dealer. But they can be small enough to invest time with you and offer personalized service.

When evaluating a branch organization as a prospective partner, here are a few things to put on your due diligence checklist:

Don’t consider the small firm to be headed for extinction. It lives, but within large broker-dealers rather than alone. You can find the relationship you are looking for. You just may need to go beyond the list of independent firm home offices.

Jason Stone is President of TAG Advisors.

TAG Advisors is where independent, entrepreneurial financial professionals thrive. If you would like to explore what we can do for you, contact Greg Raines at (877) 676-6785 or