Elon Musk is the planet’s leading proponent of “driverless cars.” But for all his forward-thinking genius, it’s surprising he would ever utter that phrase.
After all, how silly is it that early automobiles were called “horseless carriages?”
Or consider the last time you used a “wireless phone.”
The day will assuredly come that we travel in “cars” that coincidentally have no driver.
Why then do we still refer to so many firms in the advisory profession as broker/dealers?
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We have wirehouse broker/dealers, regional broker/dealers, independent broker/dealers.
While there are niche firms that are the exception, most “broker/dealers,” in the sense of how we commonly use the phrase, are no longer primarily broker/dealers at all.
Consider any of the larger W2 or 1099 “broker/dealer” firms. Each is paired with a “corporate” RIA, under which their affiliated advisors can offer both commission solutions (under the B/D) and fee-based solutions (under the RIA.)
Debating this “dual hat” structure goes well beyond the scope of this article. But it is the norm, not the exception.
Most of the large broker/dealers originally started solely as a broker/dealer. This enabled their registered representatives to distribute product solutions to their clients in return for a commission.
As time progressed and the industry evolved, a growing demand for fee-based advisory solutions forced these broker/dealers to introduce an RIA option for their brokers to utilize. Licensed as “investment advisor representatives” of the RIA, these advisors could now offer both commission solutions and fee-based solutions.
Read the full article here by Brad Wales, Advisor Perspectives.
