Broker/Dealers Survive Marketplace Shifts

McCarthy, Ed
May 1999
Journal of Financial Planning;May99, Vol. 12 Issue 5, p58
Academic Journal
This article discusses the changes in the financial planning landscape and its impact on broker/dealer firms. The emergence of fee-based services, particularly for asset management, has been one of the most powerful trends of the past decade. The financial news media convinced many consumers that the receipt of commissions prevented planners from providing impartial advice. Recognizing the trend, many advisors dropped their sales licenses and moved to fee-based asset management. In addition to the marketing benefits of charging fees instead of commissions, the switch also stabilized planners' revenues and allowed them to bundle planning services within the asset management fee. As the move to fee-based compensation gained speed, some observers predicted the demise of those broker/dealers who served commission-based planners. Their reps would resign, form their own registered investment advisory firms and stop selling commissioned products. The sources interviewed for this article report that this scenario hasn't played out, however. Another dominant theme in recent years has been consolidation. In particular, insurance companies have acquired numerous independent broker/dealers. SunAmerica, Pacific Mutual, Aetna and New England Life have all bought firms--multiple firms in some cases. The growing importance of technology has been another critical issue for broker/dealers.


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