The fact that an independent broker dealer won a seat last month on the National Association of Securities Dealers’ Board of Governors wasn’t lost on Mike Sherzan.

“The independents are getting their voice heard now a little bit,” said Sherzan, president and CEO of BDFSC Holdings Corp., the Johnston-based parent company of Broker Dealer Financial Services Corp.

Breaking onto the national NASD ballot through a write-in campaign, two independent brokers competed for seats on the board, with one of them, Brian J. Kovack, founder of a Fort Lauderdale, Fla.-based brokerage firm, winning a seat. Tyler F. Dedman, a retired U.S. Navy rear admiral who also advocates reducing what many independents say is excessive regulation by the NASD, won another of the four seats that were open.

For Sherzan, who founded Broker Dealer Services Corp. 15 years ago, competing against the big regional and national brokerage houses hasn’t been easy, but being independent allows him to offer services his larger rivals can’t or won’t provide, he said. Government regulation of the industry has also made it tough for independent broker dealers.

“I believe there should be adequate regulation, but I also believe regulation can be used to hamper competition,” he said. “That’s where we have to be careful that it’s not overregulated. It’s extremely difficult to gain access to this industry from an entrepreneurial perspective.”

In 1990 Sherzan organized a buyout of a regional investment brokerage, R.G. Dickinson & Co., and served as its president until acquiring its Broker Dealer Financial Services division. A year later, he merged the company with an Ankeny broker, IBA Securities. In 1996 Sherzan formed Investors Advisors Corp., which specializes in wealth management, and in 2001 launched Bankers Financial Services Corp. to design and distribute an indexed certificate of deposit product to community banks.

Collectively, the companies now manage $1.3 billion in client assets. One of its divisions, IBA Securities, has also become the largest provider of brokerage services to banks in Iowa, supporting licensed representatives at more than 80 bank offices.

“I’m proud of what we’ve done,” Sherzan said. “I’m most proud of the company’s affiliations and our employee base. We are survivors.”

The company’s 60 employees at its Johnston headquarters and six sales offices support about 200 outside salespeople who, collectively, are licensed to sell securities in all 50 states. The majority of its 49 full-service offices are in Iowa, though it also has representatives in large metro areas and high-population states, among them California, Florida, Illinois, Minnesota and Texas.

According to the Financial Services Institute, an advocacy organization formed in 2004 for independent broker dealers and independent financial advisers, approximately 35 percent of the estimated 300,000 advisers in the financial services industry are affiliated with independent broker dealers.

“There’s a reason that you don’t see a lot of independent broker dealers out there,” Sherzan said, citing both the heightened competition as well as the layers of regulatory oversight added in the past two decades. “If you’re even thinking about starting a broker dealer, an independent firm and growing it to any national size, the competitive structure against you is enormous,” he said. “But that’s why it’s fun. They can’t do things that we can do.”

Stock options are one example, he said.

“Most people associate options with gambling,” Sherzan said. “That’s not all true. There are options that allow people to reduce risk. If I own an option to sell 100 shares of IBM that I own at $100 per share, no matter what the price, who’s the risk-taker, those that invest in options, or those that don’t? And there are firms out on the Street that will not allow their representatives or their clients to have access to options. That’s why I’m an independent. … That’s why education is very important to what we do.”

Another product that may help investors mitigate market risk, a certificate of deposit indexed to the Dow Jones industrial average, has proved to be popular with community banks, Sherzan said. The CD can be sold directly by the banks or through broker dealers nationally through Broker Dealer Financial Services.

“If you take a bank product and you provide access to an instrument that’s tied to an index, and on top of that you provide a guarantee the principal won’t be lost if you hold it to maturity, and on top of that you make it FDIC-insured, now you know the definition of competition,” he said.

Bankers Financial Services has a patent pending on the structure of the product it offers to community banks, which Sherzan said he believes is unique in the country.

Historically, only very large banks such as JPMorgan Chase had sufficient deposits to create these instruments, “because the people that provide you with the guarantees inherent in the product, to make a profit, require large dollars,” he said. “What we did was, we convinced them to allow community banks access to this product in smaller dollar amounts.”

With the stock market’s performance improving, “I think more bank customers are looking for a way to provide some security for their funds, but also some returns,” said John Sorensen, president and CEO of the Iowa Bankers Association.

Despite double-digit increases in loan growth, deposit growth among Iowa banks has been stagnant, Sorensen said.

“So banks have had to be more creative about sources of funding, and devise new products like an indexed CD to catch the interest of those who had been tending toward mutual funds or other investments,” he said.