Change or become obsolete. So says a recent study from Pershing LLC that shows how elite broker-dealers are outperforming their peers by focusing on six key differentiators and responding to innovations in technology, service methods and shifts in demographics.

According to the report, Broker-Dealer of the Future II: Six Stunning Transformations That Are Creating the Broker-Dealer of the Future, profitability has more to do with a firm’s strategy than its size and capabilities, and many broker-dealers can boost profits by transforming their business models.

Pershing examined six key transformations that will guide the broker-dealer of the future.

The first transformation is identifying ways that your firm can avoid becoming a commoditized operation. In the past, the requirement to be supervised by a B-D and the need to access technology were big reasons advisors affiliated with broker-dealers. But as competition has given advisors more options for whom to affiliate with and technology has become more ubiquitous, today’s successful B-Ds are defining their strategy as a value-added relationship with advisors in the center. B-Ds that act as strategic partners to their advisors will create lasting value for advisors and their clients, says Pershing, which found that top B-D organizations are re-examining their strategies and asking two fundamental questions: Why do advisors join us today? And why do they choose to stay?

The second transformation relates to fostering organic growth. Many B-Ds devote tons of time and money in the pursuit of acquiring new talent. But organic growth, says Pershing, may offer a return up to six times higher. Forward-thinking B-Ds continually look for ways to enrich and maximize existing relationships.

Third, B-Ds need to establish a sound economic model that deals with challenges that can crimp margins such as ballooning bonuses, higher compliance costs and growing technology investments.

Fourth, rethink the wisdom of high-cost recruiting. According to Pershing, a B-D can spend seven years’ worth of profitability to attract and bring in the best recruit. However, high-priced recruits tend to have shorter tenures that average just three to five years, so a short-term focus in this area might hurt in the long term.

Another key transformation involves the need for B-Ds to espouse advisory services and act more like a large RIA than a large B-D. By offering advisory services as part of its organizational core, Pershing says B-Ds can build a profitable and integrated service model that blurs the historical line between brokerage and advisory businesses.

And finally, B-Ds should demonstrate stability and longevity because top advisors put a premium on stability and a sound risk culture and want to affiliate with B-Ds that clearly demonstrate their commitment to these attributes.