Berthel Fischer sees sharp decline in commissions, turns to building RIA

Berthel Fischer & Co. Financial Services Inc., an Iowa-based broker-dealer well known for selling high-commission alternative investments, has shifted its strategy to focus more on recurring revenues from fee-based assets at its registered investment adviser, according to the firm’s CEO and chair, Thomas Berthel.

Annual revenues have dropped sharply, as much as 40%, at the broker-dealer over the past seven years as the industry moved away from commissions from alternative investments to recurring revenue from managed money products.

The change in strategy began four to five years ago, Berthel wrote in an email to InvestmentNews. And the change comes at what appears to be a tough time for the firm; according to its 2020 annual audited financial statement with the Securities and Exchange Commission, Berthel Fischer reported $37.8 million in total revenue last year and a loss of $2.3 million.

Berthel Fischer filed its annual audited financial statement with the SEC in March but it did not appear on the Commission’s website until this month.

With about 240 reps and advisers, the firm did not report revenues and income to the SEC in its audited financial statements for the past few years, but it did for 2013, the height of alternative investment sales, particularly nontraded real estate investment trusts, at independent broker-dealers like Berthel Fischer.

For that year, the firm reported total revenues of $64.3 million, net loss of $760,000. That means revenues at Berthel Fischer have declined 41.2% while losses have tripled in the past seven years.

Berthel Fisher has faced investor complaints and penalties by regulators in the past. Alternative investments may pay brokers and advisers higher commissions than plain vanilla investments like indexed mutual funds.

While the financials are difficult at the brokerage, the overall business, which includes an RIA with $798 million, is more robust, Berthel wrote in an email. The firm also dodged a bullet when it did not approve the sale of private placements issued by GPB Capital Holdings, avoiding the cost and headache of potential lawsuits and arbitration claims in the future, he added.

“Berthel Fisher is happy to report that enterprise-level revenues continue to increase as we shifted our business model some time ago to more managed money programs, which provide recurring revenues, and away from commission products such as alternative investments,” Berthel wrote. “We did not, for example, approve the GPB syndication, which so many other independent broker-dealers sold, and which have not performed well.”

“Combined commission and fee-based revenues in our two independent broker dealers and our separate registered investment adviser remain strong,” he wrote, although he declined to cite specific figures to coincide with that statement. “No single-entity report would provide an accurate picture of our combined revenues.”

One industry observer was not sanguine about the recent results at Berthel Fischer.

“When smaller firms lose these niches that set them apart from the crowd, they are left with few options,” said Jon Henschen, an industry recruiter. “If they chose to focus on RIA and advisory, they are playing in a field where large-scale broker-dealers are more competitive. So, what other options remain?”

The post Berthel Fischer sees sharp decline in commissions, turns to building RIA appeared first on InvestmentNews.

Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.

Andrew Vincent
Andrew is half-human, half-gamer. He's also a science fiction author writing for BleeBot.
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