June 2, 2020
By Louis Diamond
An interesting trend is developing among the largest and most successful independent broker-dealer practices. They are essentially “growing themselves out of the market.” That is, their practices have gotten to a point at which there is not a viable successor within their broker-dealer network.
It’s a high-class problem to have — one that we see at every IBD when the top 5% to 10% of individual practices (typically those generating in excess of $3 million to $5 million of gross dealer concessions) reach a point where they begin thinking about their endgame and how they will monetize their life’s work.
Typically, advisers running independent practices would opt to sell within their own broker-dealer as it’s the path of least resistance: Buyer and seller operate on the same platforms and systems, typically have compatible businesses and are familiar with each other on a personal level. Also important, an internal transaction eliminates the need to change broker dealers, which triggers a time-consuming re-papering event that is sometimes risky — especially at a point when a business owner is trying to simplify his life.