2025 largely saw more of the same in the independent broker/dealer space, except for one big thing most advisors didn’t see coming: Commonwealth Financial Network’s sale to LPL Financial.
LPL closed on the deal in August, with the official conversion slated for the end of 2026.
The transaction raises the question of what’s the next domino to fall in the IBD space? Industry consultants and recruiters predict continued consolidation over the next year, with another major acquisition or roll-up likely to occur.
“Who’s the surprise firm that no one expected to be on the market or to sell?” said Louis Diamond, CEO of Diamond Consultants. “That’s the next wave of this consolidation. There’s too much money chasing the space, and there are too many reasons for the shareholders, some of these firms to turn down buyout offers from large strategics like LPL, Cetera and the like.”
Overall, Diamond said the Commonwealth transaction was net neutral for smaller, boutique broker/dealers. On the one hand, one of their biggest competitors is no longer in the market. On the other hand, “every advisor is forever going to be distrustful of firms that say, ‘We’re private; we’re going to stay private forever,’” he said.
Jodie Papike, CEO and managing partner of Cross-Search, said the Commonwealth deal is a continuation of advisors’ growing mistrust of firms. We’ve seen that with companies that claim they’ll never sell, only to change their stance over the years, she said.
“Advisors have a general sense of not believing anyone,” Papike said. “They don’t know where the stability can be found. A lot of them don’t know what direction they can go to, where they can join a firm and know that it’s going to be the same firm in five years, 10 years. So there’s a very heavy general sense of mistrust in the industry right now.”
Many of the legacy IBDs were established in the 1980s and 1990s, often with a single owner or a couple of owners. As those owners approach retirement age, they are now faced with the challenge of having no succession plan in place.
“It just kind of becomes inevitable that they decide they’re ready to sell it,” she said.
Matt Lynch, managing partner of Strategy & Resources, a financial services consulting firm, said he does not see a level of mistrust. But he does see that the mid-sized or boutique b/ds continue to have a more direct relationship with the advisor.
“The advisors like having access to the decisionmakers, and the larger companies, some of them still have that, but a lot of them tend to work through large OSJ or other intermediaries and don’t have quite the same deep relationship with the advisors that the IBDs were known for so many years,” he said.
Lynch added that the Commonwealth deal reinforced the value of advisors having a relationship with senior management, and this remains a competitive differentiator for IBDs.
AI and the IBD Space
Artificial intelligence technology could be one driving force behind continued consolidation in the IBD space in 2026, Diamond said.
“Tech has always been there, but I think this is the next big punch list item that firms are going to say, ‘Hey, we can spend $100 million to build an AI system that may or may not be market leading. By the time we build it, it might be obsolete anyway. Or does it make sense to just take advantage of where multiples are and just link up with someone that’s already doing it well or pass the investment requirement onto another firm?’”
How IBD firms adopt AI and keep pace with the technological development and R&D that come with it will be key. Diamond is already starting to see advisors prioritize AI when considering a transition.
“Whether I want to go to a firm that lets me adopt various AI tools with more freedom, or this firm has kind of solved it and has better AI tools that’ll make me more efficient, that’ll be the clearest win that an advisor will have over the next few years is how can I deploy AI in my practice to grow faster, drive efficiencies, et cetera,” he said.
Mark Casady, co-founder of Vestigo Ventures, executive chairman at FMG and the former CEO of LPL, said IBDs that are AI-forward are likely to excel in recruiting, profitability and overall growth. (To be sure, Vestigo, Casady’s venture capital firm, invests in several AI startups.) But AI is not a scale game, he said.
“Now we’re going to start seeing the benefits of AI, which is … more about partnering with the right firms to get your AI story together and your AI offering to existing advisors and to prospective ones,” he said.
“It’s different than other technologies I’ve worked in where you can build up that capability in-house, and that was our strategy at LPL when I was in charge of it, and it has been their strategy since then,” Casady said. “But this is a different technology. You can’t easily get the talent, and the talent is very scarce. So you’re actually better off working with a partner. They’re looking to essentially rent their AI expertise and rent it by utilization rather than some overwhelming check.”
“We’re seeing a lot of very smart, relatively small IBDs and RIAs using these technology providers effectively, doing it by the drink, by the transaction or activity, and again, getting them net savings out of it.”
The IBDs have been slower to innovate on AI than RIAs, Casady added.
“They had been running pretty fast, similar to RIAs, and then they started to put in place processes for reviewing AI from a risk management standpoint, which they should do,” he said. “But that’s really slowing them down, so they’re going to need to figure that process out so they can move faster.”
Blurring the Lines
Another trend shaping the IBD space in 2026 is a continued blurring of the lines between the different channels. The reality is, there’s not much difference between an IBD, a wirehouse and an RIA. Most wealthy families don’t know the difference, Casady said.
For example, many of the large IBD players have entered the business of acquiring RIAs themselves. We’ve seen this with Kestra’s acquisition arm, Bluespring. LPL, Osaic, Cetera, Cambridge and Raymond James have started to do this.
“Why not go ahead and use your capital in the areas that you think are going to be the best return?” Casady said. “Acquiring to me is just a variation on the theme of the lines blurring between the traditional channels and a desire to grow. And if one way to grow is by acquiring an RIA practice, then you can see the whole industry doing that.”
It’s one way IBDs can retain assets that they might otherwise lose and gain assets they might not otherwise gain by using their capital, he added.
IBDs are becoming viable and likely buyers for their underlying practices, Diamond said. They could become something like “walled gardens,” where they stop letting advisors leave so easily.
Papike said it’s more so that there are more resources available from firms.
“They know how many advisors are going to be retiring, and they know to keep those assets in place, they have to offer financing and programs and be facilitators for these acquisitions,” she said. “Maybe that is the definition of a walled garden: You have it good where you are, so you can use those resources and be in good shape.”
Casady said he didn’t agree with the “walled garden” analogy, because advisors have so much power. They’re the ones who have a relationship with the end client, so they’re in the best position to dictate terms.
We can continue to expect the lines to blur, Lynch agreed. The IBD space has evolved so much over the last 20 years; even the term “broker/dealer” doesn’t really inform a business model.
“If you look at what the definition of the IBD segment was 20 years ago, and we look today, there are a lot of differences,” he said. “It’s an indication that that segment continues to evolve to keep up with advisor and client expectations, and they’re pretty nimble, supported with technology and capital. Think what it looks like five years from now, who knows, but I think it continues to evolve to keep up with the demand. That’s part of the reason for a pretty positive outlook going forward.
