We’re Not for Everyone. And That’s the Point.

I’ve noticed something interesting happening lately among some of the broker-dealers that compete with Britehorn Securities. There seems to be an increasing amount of attention being paid to who has the most technology, the biggest network, the most registered representatives, the best payouts, and even, in some cases, side-by-side comparisons explaining why one broker-dealer is better than another.

I understand the temptation. We compete for business too, and I obviously have some pretty strong opinions about what we have built at Britehorn and why I think it works. But the more I have thought about it, the less interested I am in trying to make the case that Britehorn is somehow the “best” broker-dealer for every independent investment banker or placement agent.

Because we’re not.

And I actually think that is one of our strengths.

When my partners and I first acquired the broker-dealer that eventually became Britehorn Securities, we weren’t trying to build a broker-dealer business at all. We were investment bankers who needed a regulatory home for our own M&A and capital raising work. Over time, we started licensing a few friends of the firm, then a few more, and somewhere along the way what had been a small ancillary business became a real business of its own.

That history has probably shaped Britehorn Securities more than anything else.

We didn’t start with a piece of software and then go looking for hundreds of bankers to put on it. We didn’t start with the idea that independent bankers needed another professional or social network. And we certainly didn’t start with a goal of having the most registered representatives in the industry.

We started as investment bankers who built a broker dealer based on our own experience closing deals and with an understanding of the challenges and opportunities in the middle market.

And that is still, fundamentally, what we are now providing to 80+ bankers across the country and in select markets globally.

Bigger isn’t necessarily better. Neither is smaller.

There are some very large independent broker-dealer platforms today with hundreds of registered representatives. That’s an impressive accomplishment and clearly there are bankers who value the scale and resources that come with that model.

We have made a different choice.

I don’t have a goal of having 500 or 1,000 registered representatives at Britehorn. In fact, I think getting anywhere close to those numbers would fundamentally change the business we have built.

I know many of our reps personally. Our compliance team knows them. We know the types of transactions they work on, how their businesses operate and, in many cases, the clients and counterparties involved in their deals. When somebody calls with a question, there is a pretty good chance we already understand the context before they finish explaining it.

That becomes harder as you get bigger.

There is nothing inherently virtuous about being small, just as there is nothing inherently virtuous about being large. But there are tradeoffs, and we have consciously chosen which side of those tradeoffs we want to be on.

I’d rather have fewer, high-quality registered representatives and know them well than build an organization where scale itself becomes the objective.

We’re also not a software company

Technology has become a huge part of the sales pitch in our industry. There are broker-dealer platforms that have invested a lot of money building proprietary CRMs, deal management systems, data rooms, investor databases, collaboration tools and compliance technology.

For the right person, I can see the appeal.

But one of the things we’ve learned from talking to hundreds of independent bankers over the years is that many of the really experienced ones don’t need any of that.

They already have a CRM they like. They already have a data room provider or have built their own with off-the-shelf tools. They already know how they manage a deal process. They already have databases, research tools and relationships that they have spent years building.

I’ve never understood why we should make them abandon those things, or charge them for an expensive technology platform they may not want, simply because they need a broker-dealer.

So we don’t.

We obviously use technology internally and we’re always looking for ways to make our compliance processes faster and better. But I don’t view technology as the product we sell.

Our product is the people and regulatory infrastructure that allow our reps to do their business.

Technology should support that. It shouldn’t get in the way of it.

Independence means letting people be independent

The same thing is true of collaboration.

There are platforms in our industry that put a lot of emphasis on creating an internal community where bankers can post deals, share investors, collaborate on mandates and work together.

Again, I don’t think there is anything wrong with that model. Some people probably get a tremendous amount of value from it.

But I’m not convinced it is what most experienced M&A bankers are looking for.

The people we increasingly find ourselves attracting have usually been doing this for a long time. They have spent years, sometimes decades, building relationships with business owners, lawyers, accountants, private equity firms, family offices and strategic buyers. That network is a big part of the value they bring to their clients.

They don’t need us to give them a network. They already have one.

That doesn’t mean we don’t help. I talk to private equity firms and family offices every week and I’m constantly looking for opportunities to connect them with M&A advisors on our platform. We make introductions between our reps when it makes sense too.

But I think there is a difference between facilitating collaboration and trying to manufacture it.

Our reps keep their own brands, their own clients, their own relationships, their own data and their own way of doing business. We try very hard to stay out of the way of the things that already work.

To me, that’s what independence is supposed to mean.

Compliance is still a people business

This one is probably the most important to me.

I spent the first part of my career as a corporate and securities lawyer, so I may be more sensitive to this than most investment bankers, but I don’t believe good compliance can be reduced to software and workflows.

There is judgment involved.

Deals are messy. Engagement agreements are different. Transaction structures change. Something that looks straightforward on Monday can look completely different by Friday because a buyer changed the structure or a client decided to do something nobody anticipated.

When that happens, I think you should be able to pick up the phone and talk to somebody who knows you, understands the transaction and has enough experience to help figure it out.

That’s why we have deliberately kept our compliance operation in-house and accessible. Our reps know Natalia. They know me. They know the people reviewing their business, and they can get us on the phone.

Could we build a model with more layers, more outsourced resources and more technology that allowed us to supervise a much larger number of people? Probably. But then we would be building a different business.

One of the lessons I’ve learned as Britehorn Securities has grown is that some things don’t scale particularly well, and good judgment may be one of them. I’m okay with that.

We’re investment bankers too

This may be the most obvious difference between us and some of the other choices in the market, but I think it matters.

We’re still doing deals.

Britehorn Partners remains an active M&A advisory firm. I still talk to business owners. I still negotiate engagement agreements. I still spend time with private equity firms and family offices. I still deal with all of the frustrations, surprises and occasional exhilaration that come with trying to get a transaction across the finish line. So do my partners.

That gives us a perspective that I don’t think you can replicate simply by hiring people to supervise investment bankers. When one of our reps calls about an issue on a transaction, we understand why they care about the answer because we’ve probably dealt with some version of the same problem ourselves.

That’s what I mean when I say Britehorn is built by investment bankers, for investment bankers. It isn’t something our marketing team came up with. It’s literally how the business came to exist.

And we’re not going to win every deal on price

We have worked hard to keep Britehorn’s overhead low. One of the benefits of not building an enormous technology platform and not staffing an enormous organization is that we can offer what I think are very competitive economics, particularly to productive bankers.

But I don’t want to be the cheapest broker-dealer.

More importantly, I don’t particularly want a registered representative who chooses us only because we’re the cheapest. I spent enough years negotiating M&A engagements to know that there will almost always be somebody willing to do something for less. At some point you have to decide what the service is worth and what kind of relationship you want. I think the same thing applies here.

If someone’s primary objective is finding the lowest possible cost of maintaining their securities licenses, there are probably other firms they should talk to. If someone wants a huge technology ecosystem or hundreds of affiliated bankers to collaborate with, there are firms that have built exactly that.

That’s okay. We’re not trying to win those people.

What we are trying to do is become the best possible home for experienced independent M&A advisors and investment bankers who already know how to run their businesses, value their independence, want experienced people handling their compliance and appreciate being able to pick up the phone when they need help.

Interestingly, the clearer we’ve become about that, the better the conversations seem to be with the people who find us. Maybe that’s the lesson in all of this.

There are a lot of different ways to build a broker-dealer platform, just as there are a lot of different ways to build an investment banking practice. I’m less interested than I used to be in trying to convince everyone that our way is better.

I just want to keep getting better at it for the people who think the way we do.

We’re not for everyone.

And that’s the point.

Brett