Broker-dealers, through their licenses, can provide investment banking services, so those who choose to do that business can give their clients access to participate in the deals. This provides an additional lever for brokers to offer their clients diversified investment opportunities and, more generally speaking, greater value in the services they provide.
Without a broker-dealer license, RIAs are not allowed to provide this sort of access.
A Niche Offering
The winds are clearly blowing in a direction that will render the brokerage model a niche offering, more suited to specialty investment needs than the mass market.
Still, rumors of the death of brokerage have been greatly exaggerated. Despite all the noise in the market, broker-dealers owe it to themselves to lean into the advantages of the brokerage model and find ways to offer clients value that RIAs can’t.
Michael Nessim is CEO and managing partner of Kingswood U.S, a network of wealth management firms that includes two SEC-registered RIAs and two Finra-licensed broker-dealers collectively overseeing nearly $2.5 billion in assets.