The things that advisors love about independent broker-dealers also give rise to the problems that make survival difficult in the channel, according to a Cerulli Associates report released Monday.

"Unfortunately for IBD firms, the very features that draw advisor interest in the channel create conditions that make profitability challenging in the best of times and nearly impossible when times are bad," reports Cerulli, a Boston-based research firm with a focus on asset management, in its second-quarter 2012 "Focus on Independence Issue" in The Cerulli Edge: Advisor Edition.

Indie broker-dealers recoup only thin margins, which in turn are forcing a focus on true differentiation between firms. IBDs' promises to advisors of generous payouts, flexibility and high service levels are putting added pressure on IBDs trying to win advisors to their particular model, the report says.

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