Why the Breakaway Broker Exodus Hasn’t Happened

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A number of industry observers, including me, have been predicting a wave of defections from the brokerage model. For years, we’ve expected that captive brokers who are employed by larger wirehouse organizations will, in droves, flood the independent world like refugees seeking independence.

In my book, The New Profession, I predicted that this flood of ex-brokers (what the trade press calls “breakaway brokers,” and the brokerage firms have characterized as “rogue brokers”) represents one of the biggest growth opportunities for independent advisory firms. If you can help these people acclimate to a non-sales culture, they can bring significant existing business plus valuable marketing skills to your business environment.

This mass exodus hasn’t happened, much to the chagrin of us prognosticators, and I know why.

The brokerage firms have done a terrific job of characterizing independent advisors as rogues who are trying to evade the FINRA compliance regime, and convincing their reps that they will go broke if they leave the comfortable marketing umbrella of their wirehouse brand. Beyond that, these firms provide brokers with a comfortable office, sometimes a staff, and an integrated suite of software capabilities. Leaving that environment entails a lot of complexities like finding your own custodian, creating your own tech stack, hiring staff, renting an office and setting up a phone system.

There is, of course, a support network of custodial transition teams who will help brokers figure out those things. But those teams are experts in their own firm’s solution.

The missing ingredient, until now, was a holistic source of unbiased advice about all various options.