UNDER PRESSURE: The 2017 Broker-Dealer Reference Guide

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1 UNDER PRESSURE: The 2017 Broker-Dealer Reference Guide F Though more investors than ever are saving money for retirement, independent BDs operate in a complicated and ever-changing business environment striking information. For instance, the number of or the firms participating in Investment By JANET LEVAUX reps leaving firms in this year s survey surpassed Advisor s annual Broker-Dealer Reference Data compiled by the number joining them. Still, the average headguide, the competitive and convoluted LIANA ROBERTS count at firms participating in the survey rose by atmosphere they face today can be perplexing. a handful from last year, reaching 1,166 per BD in Advisors, clients and regulators are asking more and more of Furthermore, the average level of fees and commissions per them, which translates into higher expenses. Still, investors are rep, or gross production, is rising. In fact, it is close to $232,000 contributing more to retirement and other accounts, and positive a jump of 6% from 2016 and 9% from Average assets per returns in the equity markets have been lifting balances recently. advisor are expanding at an even more aggressive pace. This Yet industry consolidation continues. The number of indefigure is close to $31 million, up about 15% from a year ago. pendent broker-dealers stands at around 3,900, according to Nonetheless, average gross revenue per IBD dropped slightly Fishbowl Strategies, down from nearly 4,600 in 2010, and at least from 2015 to 2016, illustrating the fact that many firms face 1,000 of these firm have less than 10 registered reps. Meanwhile, intense competition for their advisors, clients and business. The the number of RIAs is expanding and is close to 12,200. fee-based figure, though, improved during the same period. The 2017 Broker-Dealer Reference Guide reveals some Number of companies included in directory: Total number of representatives in directory: 59,485 77,562 77,562 Average number of reps per firm: 1,166 1,158 1,268 5,188 / 5,392 7,100 / 7,012 11,664 / 8,007 Average annual gross production per rep: $231,942 $219,531 $212,587 Average AUM per representative ($ mil.): $30.95 $26.95 $23.93 Average gross revenue per BD ($ mil.): $174.54e* $ $ Average fee-based revenue per BD ($mil.): $78.20e* $ $ Number of reps added or dropped: * Estimate based on data from 32 BDs, with many large firms declining to provide 2017 estimates.

2 Top Broker-Dealers by 2016 BD Gross Revenue The largest broker-dealers are taking on more and more tasks for their advisors, which requires that firms invest more resources than in the past. The biggest IBD by sales is LPL Financial, with nearly $4 billion in gross revenues last year. That s more than double the level produced by its closest rivals. LPL Financial is successful because we allow our advisors to focus on generating revenue by helping them eliminate, automate or outsource activities that can be time-consuming and burdensome in today s world, explained LPL Financial s Andy Kalbaugh, head of national sales and consulting. BD Gross Revenues BD Total Expenses Fee-Based Revenues Avg. Gross Dealer Con per Rep ($ Thousand) LPL Financial LLC $3,980.0 $3,560.0 $1,290.0 $208.7 Raymond James Financial Services Inc. $1, $855.0 $554.0 Commonwealth Financial Network $1, $644.5 $508.5 Cambridge Investment Research $711.5 $669.0 $388.3 $244.2 Securities America $ $248.5 $234.0 Cetera Advisor Networks LLC $ $210.3 $192.0 Waddell & Reed Financial Advisors $ $224.5 $242.8 Royal Alliance Associates Inc. $ $231.5 $262.0 Kestra Financial Inc. $ $197.8 $320.4 Questar Capital Corporation $ $14.8 $152.8 MML Investors Services LLC $367.6 $361.0 $96.7 $85.4 Signator Investors Inc. $ $80.9 $160.1 Securian Financial Services Inc./CRI Securities LLC $ $100.9 $238.6 SagePoint Financial Inc. $ $102.8 $212.8 Cetera Advisors LLC $ $125.2 $175.0 FSC Securities Corp. $ $109.0 $251.2 Cetera Financial Institutions $ $25.9 $123.4 Woodbury Financial Services Inc. $ $53.6 $219.9 First Allied Securities Inc. $ $67.5 $264.3 Triad Advisors Inc. $ $88.0 $288.7 Cadaret, Grant & Co. Inc. $149.5 $149.0 $41.2 $196.0 M Holdings Securities Inc. $148.0 $9.1 $16.0 $259.9 Centaurus Financial Inc. $ $34.6 $228.6 Summit Brokerage Services Inc. $ $35.4 $248.2 Ameritas Investment Corp. $132.1 $130.9 $34.5 $108.3 Cetera Financial Specialists $ $59.7 $88.9 Independent Financial Group $ $42.0 $241.9 Securities Service Network Inc. $ $46.7 $264.0 NEXT Financial Group Inc. $107.8 $107.5 $37.0 $166.7 ProEquities Inc. $ $54.7 $117.5 Geneos Wealth Management $104.5 $103.0 $58.2 $403.0 United Planners Financial Services $97.3 $86.7 $44.8 $221.8 American Portfolios Financial Services Inc. $91.7 $90.8 $79.8 $233.8 Sigma Financial Corporation $ $31.6 $127.8 Kovack Securities Inc. $65.4 $61.4 $28.2 $176.7 The O. N. Equity Sales Co. $56.7 $55.7 $8.4 $87.6 Girard Securities Inc. $ $15.4 $219.0 The Investment Center Inc. $45.1 $44.7 $15.6 $162.0 Prospera Financial Services Inc. $44.0 $42.0 $19.0 $464.0 The Strategic Financial Alliance $43.2 $42.5 $18.4 $349.0 Parkland Securities LLC $ $10.7 $112.5 Crown Capital Securities, L.P. $ $11.0 $114.9 Harbour Investments Inc. $37.0 $36.3 $12.5 $190.0 Kalos Capital $ $6.0 $313.6 Founders Financial Securities LLC $23.2 $22.0 $16.0 $336.0 Century Securities Associates Inc. $ $150.0 Broker Dealer Financial Services Corp. $11.6 $8.5 $5.4 $101.0 Halliday Financial $11.2 $8.3 $3.2 $278.0 Lion Street Financial LLC. $8.2 $2.2 $0.8 $126.0 Signal Securities Inc. $5.1 $5.0 $2.2 $110.0 Peak Brokerage Services $2.5 $2.5 $0.3 $210.0

3 Top Broker-Dealers by Number of Registered Reps LPL tops this chart, too, with nearly 14,400 affiliated advisors. [Our] business model creates flexibility for our advisors, allowing them to grow and evolve without having to change their broker-dealer partner. That has been our secret sauce for many years, said Kalbaugh. Other IBDs on the list aim to expand, but they don t necessarily need their size and scale to match LPL s. We re large enough to provide the integrated, more sophisticated resources of our largest competitors, but within a culture that s very relationship-driven, Raymond James President Scott Curtis explained. For Cambridge Investment Research, private ownership offers a way to control our own destiny, said President and CEO Amy Webber, and allows the firm to allocate resources on innovation even in the face of significant regulatory change. Overall Prod. Reps as of Dec. 31, 2016 Advisors Added in 2016 Advisors Dropped in 2016 Number of Years in Business LPL Financial LLC 14, Raymond James Financial Services Inc. 3, MML Investors Services LLC 3, Cambridge Investment Research 3, Cetera Advisor Networks LLC 2, Securities America 2, Signator Investors Inc. 2, Waddell & Reed Financial Advisors 1, Commonwealth Financial Network 1, Cetera Financial Institutions 1, Royal Alliance Associates Inc. 1, Kestra Financial Inc. 1, SagePoint Financial Inc. 1, Cetera Advisors LLC 1, Securian Financial Services Inc./CRI Securities LLC 1, Cetera Financial Specialists 1, Ameritas Investment Corp. 1, Woodbury Financial Services Inc. 1, FSC Securities Corp Cadaret, Grant & Co. Inc ProEquities Inc First Allied Securities Inc American Portfolios Financial Services Inc Questar Capital Corporation The O. N. Equity Sales Co Centaurus Financial Inc NEXT Financial Group Inc Triad Advisors Inc Sigma Financial Corporation M Holdings Securities Inc Summit Brokerage Services Inc Independent Financial Group United Planners Financial Services Kovack Securities Inc Parkland Securities LLC Crown Capital Securities, L.P Securities Service Network Inc Geneos Wealth Management The Investment Center Inc Broker Dealer Financial Services Corp Girard Securities Inc Harbour Investments Inc Prospera Financial Services Inc Century Securities Associates Inc The Strategic Financial Alliance Kalos Capital Founders Financial Securities LLC Lion Street Financial LLC Signal Securities Inc Peak Brokerage Services Halliday Financial

4 Top Broker-Dealers by Average Annual Gross Production per Advisor Of the 51 respondents, two have average annual fees and commissions (or production) per rep that tops $500,000: Raymond James and Commonwealth Financial. Our success reflects the collective efforts of many dedicated professionals supporting the continued success and growth of financial advisors affiliated with Raymond James, Curtis explained. Top-producing advisors thrive on the extra value-added services that Commonwealth provides, said CEO Wayne Bloom. We rely on higher-than-average staffing in terms of both quality and quantity to ensure that we deliver consistently.... As my mom told me a long time ago, there s no substitute for hard work! Average Annual Gross Production per Advisor Average Total AUM per Rep AUM in Fee- Based Programs ($ Billion) Excess Capital Raymond James Financial Services Inc. $553,700 $78.00 $ $26.80 Commonwealth Financial Network $508,250 $66.91 $61.95 $14.90 Prospera Financial Services Inc. $464,000 $48.00 $1.55 $3.64 Geneos Wealth Management $403,315 $55.00 $ The Strategic Financial Alliance $370,000 $34.50 $1.70 $1.79 Founders Financial Securities LLC $350,000 $31.30 $0.84 $0.63 First Allied Securities Inc. $328,118 $40.99 $ Kestra Financial Inc. $320,390 $57.23 $ Securities Service Network Inc. $315,276 $39.31 $5.45 $5.55 Kalos Capital $313,636 $ Triad Advisors Inc. $288,736 $43.00 $15.20 $11.03 Halliday Financial $278,000 $42.00 $ Royal Alliance Associates Inc. $261,968 $38.82 $26.49 $40.30 Summit Brokerage Services Inc. $261,255 $31.96 $ M Holdings Securities Inc. $259,879 $12.19 $4.43 $1.30 American Portfolios Financial Services Inc. $254,054 $32.20 $6.84 $2.40 FSC Securities Corp. $251,209 $37.53 $12.73 $22.40 Girard Securities Inc. $248,340 $40.16 $ Cambridge Investment Research $244,238 $26.95 $41.53 $16.26 Independent Financial Group $241,900 - $ Securian Financial Services Inc./CRI Securities LLC $238,600 $19.03 $ Securities America $233,976 $31.23 $26.30 $8.68 Centaurus Financial Inc. $228,624 $20.00 $2.80 $9.30 Cetera Advisor Networks LLC $227,073 $32.02 $ United Planners Financial Services $226,385 $30.02 $5.29 $4.74 Waddell & Reed Financial Advisors $225,559 $ $52.39 Woodbury Financial Services Inc. $219,923 $31.57 $6.48 $20.60 SagePoint Financial Inc. $212,830 $30.36 $10.79 $26.00 Peak Brokerage Services $210,000 $22.00 $ LPL Financial LLC $208,720 $35.40 $ $ Cetera Advisors LLC $208,036 $27.36 $ Harbour Investments Inc. $207,000 $35.00 $1.60 $0.60 Cadaret, Grant & Co. Inc. $195,969 - $3.87 $8.80 Kovack Securities Inc. $176,708 $21.47 $3.13 $1.88 NEXT Financial Group Inc. $166,666 $23.20 $3.61 $2.90 Signator Investors Inc. $160,128 $22.30 $7.96 $8.55 Cetera Financial Institutions $156,197 $18.01 $ Questar Capital Corporation $152,800 $17.90 $1.50 $4.38 Sigma Financial Corporation $139,818 $16.58 $ Lion Street Financial LLC. $125,000 $53.00 $0.29 $0.32 ProEquities Inc. $117,500 - $2.90 $7.30 Ameritas Investment Corp. $116,919 $18.00 $4.09 $7.92 Crown Capital Securities, L.P. $114,917 $10.86 $1.14 $2.76 Parkland Securities LLC $112,464 $14.60 $ Cetera Financial Specialists $108,612 $16.70 $ Signal Securities Inc. $105,000 $18.00 $0.27 $0.27 Broker Dealer Financial Services Corp. $91,000 $0.91 $0.65 $0.27 The O. N. Equity Sales Co., $87,589 $13.81 $1.01 $2.24 MML Investors Services LLC $74,862 $19.56 $15.30 $17.58 Century Securities Associates Inc $2.00 The Investment Center Inc. - $40.00 $2.10 -

5 Top Broker-Dealers by Number of Reps With Their Own RIA The popularity of RIAs is on the rise, which some firms are eager to support. Triad Advisors was founded nearly two decades ago with an exclusive focus on supporting hybrid advisors, including those with their own RIA, said CEO Jeff Rosenthal. This was years before the concept of being a hybrid advisor, let alone having your own RIA or hybrid RIA, was as mainstream within the industry as it is today. Today, growing regulatory issues favor IBDs that work with the major custodians, Rosenthal said. Triad believes its younger, more diverse advisor population benefits its growth and performance. When you combine that with a boutique service culture that also benefits from the Ladenburg Thalmann resources, you have an extremely strong value proposition, he explained, adding that most of its management team is part of Gen X. Reps With Their Own RIA Number of CFPs in Total Rep Force Average Years Experience per Advisor Triad Advisors Inc. 75.8% 34.5% 20 Peak Brokerage Services 52.3% 6.8% 16 United Planners Financial Services 48.8% 23.7% 30 Royal Alliance Associates Inc. 41.3% - - LPL Financial LLC 33.3% - 18 Securities Service Network Inc. 29.7% 33.4% 22 Kalos Capital 29.1% 13.6% 20 FSC Securities Corp. 23.7% - - ProEquities Inc. 20.6% - - American Portfolios Financial Services Inc. 19.4% 13.9% 18 M Holdings Securities Inc. 18.1% 14.0% - Securities America 17.1% 29.2% - Lion Street Financial LLC. 16.9% 12.3% 20 Independent Financial Group 15.9% 17.3% 17 Crown Capital Securities, L.P. 13.4% 21.8% 18 Cambridge Investment Research 11.9% 25.4% 19 Geneos Wealth Management 11.6% 40.5% 20 SagePoint Financial Inc. 10.6% 20.4% Commonwealth Financial Network 10.1% 42.6% - Halliday Financial 7.3% 24.4% 22 Broker Dealer Financial Services Corp. 7.2% 9.4% 10 Kovack Securities Inc. 6.8% 17.7% 21 The Strategic Financial Alliance 6.4% 47.2% 20 Harbour Investments Inc. 6.1% 16.2% 15 Cadaret, Grant & Co. Inc. 5.4% 17.6% - Prospera Financial Services Inc. 5.3% 9.0% 27 Raymond James Financial Services Inc. 2.8% 23.9% 20 NEXT Financial Group Inc. 2.7% 10.3% - The Investment Center Inc. 2.1% 10.1% 15 Signal Securities Inc. 2.0% 18.4% 21 Centaurus Financial Inc. 1.6% 37.5% 22 Kestra Financial Inc. 1.0% 21.4% 18 Signator Investors Inc. 0.2% 24.2% - Woodbury Financial Services Inc. 0.1% 0.0% - Ameritas Investment Corp. 0.1% 0.0% 5 Century Securities Associates Inc. 0.0% 24.0% 26 Founders Financial Securities LLC 0.0% 32.0% 20 MML Investors Services LLC 0.0% 0.0% - Parkland Securities LLC 0.0% 7.8% 10 Questar Capital Corporation 0.0% 0.0% - Securian Financial Services Inc./CRI Securities LLC 0.0% 18.0% - Sigma Financial Corporation 0.0% 16.5% 10 Cetera Advisor Networks LLC 0.0% 0.0% 22 Cetera Advisors LLC 0.0% 0.0% 21 Cetera Financial Institutions 0.0% 0.0% 15 Cetera Financial Specialists 0.0% 0.0% 17 First Allied Securities Inc. 0.0% 0.0% 21 Girard Securities Inc. 0.0% 0.0% 22 The O. N. Equity Sales Co. 0.0% 17.8% - Summit Brokerage Services Inc. 0.0% 0.0% 21 Waddell & Reed Financial Advisors 0.0% 15.2% 12

6 Top Broker-Dealers by Ratio of Reps to Home Office Staff Ratio of reps to home office Total Home Office Staff Number of Recruiters Number of Compliance Professionals Century Securities Associates Inc Raymond James Financial Services Inc , Halliday Financial Commonwealth Financial Network Prospera Financial Services Inc Kalos Capital Waddell & Reed Financial Advisors Summit Brokerage Services Inc Parkland Securities LLC Securities America Broker Dealer Financial Services Corp The Strategic Financial Alliance Cambridge Investment Research First Allied Securities Inc Founders Financial Securities LLC LPL Financial LLC 4.5 3, Geneos Wealth Management Girard Securities Inc NEXT Financial Group Inc Cetera Financial Institutions Sigma Financial Corporation Signal Securities Inc Kestra Financial Inc Peak Brokerage Services FSC Securities Corp Kovack Securities Inc Securities Service Network Inc Woodbury Financial Services Inc Securian Financial Services Inc./CRI Securities LLC The Investment Center Inc Cadaret, Grant & Co. Inc ProEquities Inc American Portfolios Financial Services Inc Lion Street Financial LLC SagePoint Financial Inc Centaurus Financial Inc Independent Financial Group United Planners Financial Services Questar Capital Corporation Triad Advisors Inc Cetera Advisor Networks LLC Cetera Advisors LLC Signator Investors Inc Ameritas Investment Corp Royal Alliance Associates Inc Harbour Investments Inc Cetera Financial Specialists The O. N. Equity Sales Co Crown Capital Securities, L.P M Holdings Securities Inc MML Investors Services LLC