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Articles Written by Jon Henschen

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Which Broker-Dealers Will Survive? Malcolm Gladwell Offers Some Answers

16:09 16 June in Articles Written by Jon Henschen by rafferty

June 16, 2016 By Jon Henschen, as featured on ThinkAdvisor   Determining the ideal elementary school class size has been a hotly debated topic for a number of years. The prevailing wisdom is that smaller is better. But is that always true? In his book “David and Goliath,” author Malcolm Gladwell uses the “Inverted U Curve Principle” to demonstrate the ideal class size. I’d argue that the U Curve provides interesting insights into the ideal size for a broker-dealer, and suggests which BDs will survive in the current market and regulatory atmosphere. But first, let’s explore Gladwell’s research. Gladwell explains that there are three parts to the inverted U curve, and each part follows a different logic. On the left side of the curve, doing more or having more makes things better. On the flat middle, doing...

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How to Avoid Manager Absenteeism

16:50 02 March in Articles Written by Jon Henschen by rafferty

March 1, 2016 By Jon Henschen, as featured in March 2016 issue of Investment Advisor Magazine   Midsized broker-dealers are especially vulnerable as growth pulls managers in too many directions In Jim Collins’ book “Good to Great,” he presents a concept he calls the Flywheel Effect. The Flywheel Effect illustrates that businesses are like a heavy flywheel. Management's job is to get the flywheel moving as quickly as possible because its velocity generates superior results over time. To get the flywheel to move from a standstill takes tremendous effort. With continuous hard pushing, the wheel starts to move slowly. Over time and with continuous pushing, the flywheel picks up momentum. You get to a point where the weight of the flywheel kicks in your favor. It spins faster and faster, with its own weight propelling it....

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DOL Fiduciary Rule Will Accelerate Broker-Dealer Closings

16:55 22 February in Articles Written by Jon Henschen by rafferty

February 22, 2016 By Jon Henschen, as featured on ThinkAdvisor and FSI NewsBrief   Since 2008, we’ve seen a steep and consistent drop in the number of broker-dealers. As reported by data aggregator Fishbowl Strategies, we were down to 4,578 BDs in 2010. By February of 2014, that number was down to 4,181. We ended 2015 with 4,034 broker-dealers, with the largest segment of firms closing by far being equity trading firms. September 2015 turned out to be a false flag of hope where we had 14 new firms admitted and only 5 firms withdrew. Nevertheless, fourth quarter results continued the downward trend. Looking at the fourth quarter of 2015, we had 16 new firms that were admitted and 53 firms that withdrew. Of the 53 that withdrew, 32 were equity trading firms, 12 were private...