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Let’s Hear It For The Smaller Firm

April 20, 2023

The question we frequently receive from a potential new client is, “are you a fiduciary?” The answer is yes, though the caller doesn’t necessarily know exactly what it means. They know the word. We explain it is our responsibility to put the client’s interests above our own.

Yet there is a lot of competition for prospective clients. Large brokerage firms such as Merrill Lynch or Goldman Sachs are in competition for clients’ business as much as small independent firms are.

Brokerage firms have large marketing budgets. They can buy expensive ads plus most consumers will recognize their name.

Each consumer may contribute to the brokerages’ bottom line if they are sold products profitable to the company (think annuities, securities with a commission, etc.). Alternatively, independent firms that are required to be fiduciaries don’t make a profit on a product. Their job is to put the client’s interest first to help achieve their goals.

Over the last 10 years, the number of brokerage firm representatives declined to 612,457 in 2021 compared to 669,794 in 2010 (according to their regulatory body – FINRA).

The Security and Exchange Commission (SEC) regulates financial advisory and financial planning firms – reports an increase in independent firms. In 2012 the number was 31,420. In 2021, the number grew to 35,063.

While smaller independent firms may not be as profitable as brokerage firms, it seems the consumer is learning that being a fiduciary offers more help for a better future.


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