S&P Warns It Could Get Bumpy For Brokers, But Thinks Independents Will Hold Up OK Hot
The S&P report itself is for the rating agency's paying customers only, but we got to see a copy.
The title, "Independent U.S. Brokers Could Face Market Shifts But Should Maintain Stable Credit Profiles," really sums it up nicely.
S&P thinks that the fact that the captive brokerage firms are owned by massive banks is a potential liability -- basically, as we've seen with Merrill Lynch and Wells Fargo Advisors, the bank could weigh the brokerage unit down.
(We have also seen this from the other side, with wealth management firms like Wilmington Trust that got into banking and were eventually buried in rotten loans.)
Even though independents like LPL are smaller and more specialized, their refusal to even dabble in becoming full-spectrum financial providers actually helps their credit profile by keeping them out of dangerous areas, S&P says.
The fact that S&P went out of its way to affirm the channel's credit tells us quite a bit.
And the lesson is applicable for even smaller independent operators in the industry. Time and again, firms borrow too much to expand into markets they never really wanted to serve anyway.
At best, the new businesses cut into their profitability. At worst, the firms implode.
This Website Is For Financial Professionals Only
- Despite Its Long Rap Sheet, Merrill Lynch Is Coopting The Fiduciary Message; Thundering Herd Will Beat A Glorious Path To Restoring Investor Trust
- Commonwealth Financial Network Announces New Advisor Affiliation Models: You Can Be A Fee-Only RIA And Leverage The BD's Services
- 2012 Report Identifies Top Five Challenges For Broker-Dealers Along With Industry Trends And Best Practices
- Lincoln Financial Advisor Defamation Case Highlights The Limitations Of Brokercheck