What it takes to become an Independent Broker Dealer


The following guest post is courtesy of Klaus Nymand, Partner at MoneyBanker.com

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Klaus Nymand, Moneybanker.com

Joining the broker-dealer professional has two avenues you can explore. The most common one is applying for a job and settling down as an employee. The second option is a call to the risk takers and those looking for a more rewarding career both in pay and personal achievements. That is, starting your own broker-dealer firm.

However starting your own venture as an independent broker is a risky undertaking that requires knowledge on a few working points for that smooth take-off.

Capital Outlay

Starting out as an independent broker does satisfy the same issues of any startup. The first step is finding working capital. As a broker-dealer, you should be looking for a capital outlay of between $50,000 to up to $150,000 as a good start for trading.

Work to build up your capital amount as a good safeguard for your finances as well as those of the potential investors. Credit loans can act be a lifeline for your business in terms of generating capital in the event other sources of funds do not materialize. Financial prudence dictates that your venture should maintain its expenses to the lowest possible figures so as to reduce on the cash outflow that will affect your revenue margins.

FINRA requires that the capital amount ought to cater for all net capital requirements including the first six months’ worth of expenses, considering that for most business startups break even within a period of six months to three years.

FINRA Registration

The Financial Industry Regulatory Authority (FINRA) is an organization of professionals in the financial field. Becoming a member offers some advantages for broker-dealers including self-regulatory, playing an advisory role to its members, and creating more influence in an economy on matters related to broker-dealers.

In this spirit, you are guaranteed of peer support for your new business in the field, and you also get to sharpen your skills in the through factoring the emerging trends as well as capitalizing on various available opportunities.

Members benefit through various initiatives such as the anti-money laundering programs, written supervisory procedures, continuing education programs, and developing detailed business plans.

Membership In The Securities Investor Protection Corporation

Investors need an insurance policy against a financial loss that they risk incurring due to financial turmoil that the financial institutions may suffer from. As a federally mandated investor watchdog, it is prudent as a broker-dealer because you become a member. It goes a long way to securing your investors’ wealth, and it is a right step in professionalism and ethical practice.

Documentation and Regulatory Requirements

The regulatory requirements vary in different states. However, they border on acquiring several federal and state certifications, and the licenses required to get you running smoothly.

One of the mandatory legal requirements is a complete registration with the Securities and Exchange Commission (SEC). By completing the BD (Broker-Dealer) Form, the SEC will have a review on all personal and professional life of the partners and employees to ascertain the level of conflict of interest within the firm’s business deals. This is in line with its mandate of ensuring that professional standards, securities sold, fiscal responsibility, and the operational model of firms meet the set threshold.

Advantages That Tag Along With Setting up Your Own Broker-Dealer Shop

Starting your own brokerage has several advantages however, the following two stand out.

Demand For Professional Financial Advice

With the growing number of potential investors, setting up shop to tap on these growing numbers will be a wise thought. The amount you stand to generate as profit margins are far greater than those in the same field practicing as employed broker-dealers.

Diversity In The Field

As a broker-dealer, you have an avenue to offer a variety of services that goes a long way in bumping your income levels. On one hand while managing client investments, you may also offer financial planning services. A look at your cash inflows should then reflect earnings from investment management, financial planning, and consulting services.

With growing economies and diversified investment opportunities, broker-dealers have a much greater platform to tap into the rewarding field of finance. Your decision to setting up shop is a far better thought for your career and financial growth.

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What it takes to become an Independent Broker Dealer

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