When you’re a parent, you always want to shield your child from the brutal realities of the world. You want them to maintain that wide-eyed innocence for as long as possible.

But sooner or later, they realize: It’s a dog-eat-dog world out there.

Same goes for the independent broker/dealer business. In REP.’s third annual Independent Broker/Dealer Report Card Survey, fielded at the end of last year, 2,873 advisors turned out to advocate and endorse their firms, giving them high overall scores in categories from compliance to compensation and benefits.

But the results seem to belie the pressures that these home offices are under. The economics of the IBD business haven’t changed; independent b/ds are up against it. They’re faced with rising regulatory costs and a greater demand for technology investment to stay competitive. Yet many of their traditional revenue sources have dried up, with low interest rates and the continued caution of retail investors. 

“‘I have to throw more lawyers and legal aides and compliance people at watching [advisors],’” says Brad Hintz, analyst with Bernstein Research, describing what many IBDs are thinking. “‘And my expenses are going up, same time my revenues aren’t, and I’m trying to compete with people who are offering somewhat better platforms than I and certainly a better list of products than I’m able to.’”

As a result, attrition rates are high, with 269 b/ds closing up shop in 2012, according The Compliance Department, a Centennial, Colo.-based firm that provides compliance outsourcing services to b/ds and investment advisors. And fewer people are starting up new broker/dealers; only 127 new b/ds were launched last year, down from 173 in 2011.

This is not to imply that the business is dying out. Those firms that can achieve economies of scale and spread out the costs of doing business among a greater number of advisors can survive and be profitable.