2025 INDEPENDENT BROKER-DEALER REVIEW & RANKING

But the broker-dealer business has a heavy gravity all its own keeping advisors in the channel: A lot of advisors can’ t give up their commission business, especially, says Diamond, if they still have 30 % or so of their business coming from it. They like having a home office deal with back-office paperwork problems, technology issues and legal / regulatory hassles.

Value? What Value? Valuing advisory businesses is tricky, especially when private equity and public markets seem to value financial advisory firms differently. That’ s led to some feeling that companies are throwing money at firms and distorting multiples.

“ It’ s one thing to buy a good company and another thing to keep running a good company and I see some firms failing at that,” says Amore. Kestra, a firm with 1,300 advisors in its three affiliation models, was recently recapitalized and bought by majority investor Stone Point Capital.( Oak Hill Capital is still a minority investor.)

Amore says that private equity tends to be more patient capital than public capital, where there’ s more immediate scrutiny. But he says advisory firms just generating cash might not always perform the best if the interest rate environment changes and the earnings aren’ t necessarily“ quality.”

Amore says private equity( and the increased access to it) has allowed companies like his to stay private whereas a decade ago he says the firm would have likely gone public to access capital to grow or expand.“ The cost of capital has changed for us with all the supply of private equity and pri-

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David Burton, the senior fellow in economic policy at the Heritage Foundation who authored Project 2025’ s section on securities regulation, says Finra’ s oversight of the brokerdealer industry is flawed and should be moved to the Securities and Exchange Commission.

“ Finra is incapable of self-reform," he said in an interview with Financial Advisor. " Some of us, including me, held out hope in 2017 that Finra could actually change things itself under new leadership. That has not happened."

Project 2025 itself said Finra has“ proved to be ineffective, costly, opaque and largely impervious to reform.”

Finra is a private corporation and a selfregulatory organization overseeing the securities industry. But it acts under the oversight of the SEC.

Burton said it will likely be up to the next chairman of the SEC— President Trump has nominated cryptocurrency advocate Paul Atkins for the post— and the majority Republican commissioners to determine whether or how the commission would absorb brokerdealer oversight. All are advocates of less regulation, and one commissioner, Hester Peirce, authored a 2015 paper calling on policymakers“ to reconsider [ Finra’ s ] growing role in light of its lack of accountability to the industry it regulates and to the public it is supposed to serve.”

Burton said that if Finra is not absorbed, it’ s critical for the SEC to ramp up its oversight anyway and for an inspector general to be appointed to improve Finra’ s accountability. Finra declined to comment.

Despite Burton’ s convictions, securities attorneys expressed wariness about such a regulatory sea change. Adam Pollet, a partner with Eversheds Sutherland, said in a recent report that“ despite... constitutional and political challenges to Finra and its enforcement program, it’ s highly unlikely that [ it ] will be abolished over the next four years, even if litigants or politicians are successful in curtailing certain practices or having the SEC more closely supervise Finra."

Even before Trump was elected, Finra faced lawsuits questioning the constitutionality of its enforcement programs. In November, a federal appellate court temporarily blocked Finra from expelling Alpine Securities without an SEC review.

“ Some of us have been speculating about recent constitutional challenges to Finra, so it’ s certainly a possibility oversight could be moved to the SEC,” says Brian Rubin, an Eversheds partner and co-author on the report.“ On the other hand, given the staffing and other cuts at the SEC, it’ s hard to imagine how they could take over the function without increasing staffing and their budget significantly.”

Michael Edmiston, a former Finra attorney who represents investors in securities arbitration, says President Trump could indeed order the SEC to acquire the broker-dealer regulatory scheme, but adds,“ I think that is unlikely.” He does worry that such a regulatory shift“ would be an extremely destabilizing event” for the American economy and American investors.

Adam Gana, a securities attorney with Gana Weinstein, says he sees no industry sentiment for such a regulatory change.“ Broker-dealer firms love Finra,” Gana says,“ especially in dispute resolution where investors win less than 32 % of cases and on average only win 20 cents on the dollar. I understand conceptually Project 2025 wants to get rid of Finra. But there will be very strong pushback from the industry, which clamored for Finra for decades.”

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