Is Your Broker-Dealer Transparent?

Dec 10, 2018 | Practice Management, Press Release

A financial professional hedges a great deal of their success on the broker-dealer they choose to affiliate with. The broker-dealer controls the price points for revenues by setting financial professional payout percentages, and it controls the price points for expenses by setting trading costs and fixed technology expenses, among other things. As a financial professional, are you aware of the true costs of the services and products for which your broker-dealer charges?

Do you know the firm’s profitability per trade or the margin they make on the E&O policy you purchase from them? Are you aware of ancillary lines of revenue to the broker-dealer like interest on cash sweeps? Most importantly, when you are looking to evaluate a new relationship with a broker-dealer, do you ask any of these questions?

Broker-dealers and financial professionals alike are in business to make money. However, financial professionals need to align with a firm that offers transparency regarding their methods of generating revenue; that’s a BD that can be trusted with your business. Today I wanted to talk about IFP and why we’ve always strived to promote transparency as a hybrid RIA and OSJ, and why we’ll continue to do so as a broker-dealer.

Motivation Beyond Profits

As simple as the concept is, IFP needs to generate revenue to keep the lights on and provide a suite of services to our financial professionals. With that said, that’s not our motivation for creating our RIA or the reason we’re creating a broker-dealer. We aim to create a culture of transparency (there’s that word again) where we foster an environment where our firm and our financial professionals achieve mutually beneficial victories. The new levels of scale we’ll bring to the table will help improve client outcomes.

Decision Buy-In

Quite often in our industry, regulatory changes or actions occur that force broker-dealers to implement new, costly initiatives. Sometimes these BDs pass on some of their increased cost to the financial professional through arbitrary fees, ambiguous service rate hikes, and other vague changes to their payment structure. We will not. If we’re forced to abide by new regulatory standards, thereby increasing our cost to do business, we will explain the situation in full detail and lay out the changes to our fees. We feel that financial professionals are more likely to trust us and buy into our firm if we’re continuously transparent about the reason behind our financial decisions, even if the decisions don’t benefit them.


I suppose the most important benefit of transparency and disclosure is trust. Do you trust that the actions of your current broker-dealer are done with everyone’s best interest in mind, or are they self-serving? Without transparency, it’s sometimes hard to make that determination. Financial professionals that affiliate with us will know where we stand financially and strategically, what our costs are, why we charge what we charge, and the reasons for our decisions, thereby increasing the trust levels between our businesses. And that trust means a stronger and more cohesive relationship.

My Last Thoughts

If you’re with another broker-dealer, I suggest you ask pointed financial questions as to their margins, markups, etc. I also suggest you ask strategic questions as to what the relationship will look like in the next 3 to 5 years. Ask them to be specific and not talk in generalities. You may not get the answers you want, however, if you feel they’re being truthful, you know you’re dealing with honorable people. I sincerely hope that you’ll be pleasantly surprised. We hope IFP’s transparency can serve as an example and motivation for other firms to follow because I believe the best financial professional is an informed financial professional. A better understanding of the environment in which they work can help lead to better outcomes for everyone.

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