Way to Go

When clients want to help their favorite charities

Illustrations by Victor Juhasz

I'M FREE! I'M FREE!" the comic strip character shouts, flinging his arms skyward and sprinting across the page with as much abandon as his tubby physique and rumpled clothes allow. "I can DO what I want! THINK what I want! I'm ON MY OWN!"

Next frame: he stops short, alarmed by the silence, the fact that no one has stopped him, or is even around. His brow wrinkles. Worry kicks in.

Final frame: his eyes are squinched shut, fists clenched at his sides, head flung back, his mouth forming a giant O. "HELLLLPPPP!" he wails. It's not so easy being on your own after all.

On his coat are printed the words Eastern Europe (the cartoon is from the early 1990's) but it could just as accurately say financial advisor. The road to independence in the financial advisory business, from wirehouse broker to registered representative to independent RIA, is a well-trodden one, and scarcely anyone who has taken a step along the path would ever think of going back. No one wants to be told what to do, of course, any more than they ever did. Nobody misses being controlled. But as for those other perks ...

"When advisors go out on their own, they don't have most of the services they had at the wirehouse anymore," says Skip Schweiss, whose firm, Datalynx, provides back-office and asset custody services to fee-based advisors. Calling the shots becomes far less fun when there is a long list of shots to call within a short timeframe, and it doesn't help when the calls are in areas with which advisors are unfamiliar. So they're hunting for help. "It used to be that all they wanted was a whole lot of mutual funds through one place. Now that's the standard. Advisors are increasingly looking to us to provide additional things - marketing assistance, practice management ideas, and research," says Schweiss. "Things have, in a way, come full circle."

Providing a smorgasbord of securities and a venue for transactions is no longer enough, and independent broker/dealers have to do more in order to continue to attract advisors. But what is it, exactly, that advisors want from their broker/dealers?

Fee-based programs. To start with the obvious, fee programs have pretty much made their way into the mainstream of broker/dealer offerings. "Independent broker/dealer programs that provide reps with ways to build fee-based relationships with their clients have become standard within most firms," according to Cerulli Associates' 1999 study, The State of the Fee-Based Financial Advisor Market. Katherine Vessenes, a compliance attorney and consultant in Bloomington, Indiana, is more direct: "Broker/dealers have to have fee programs in order to attract high-performing reps. If they don't, the reps will go elsewhere."

Flexibility. Fee programs are actually just a chunk of the larger iceberg known as flexibility. Planners want to be able to serve their clients in the way they think is best, and don't want anybody waving sheaves of rules under their noses. "They don't want to be pushed in any one direction," says Carol Sandstrom, vice president of Turning Point, Inc., a financial services recruiting and consulting firm in Clearwater, Florida, that helps match reps with broker/dealers that meet their needs. "They're looking for the broker/dealer to be like a big cafeteria, with lots of things in place that they can pick and choose from." Advisors don't want to be required to use any of the products or services, but they do want to know they are there, in case they want them at a later time. Some broker/dealers allow reps to conduct fee-based business through other venues, such as discount brokerages; others require that all fee business be funneled through the broker/dealer.

Flexibility also means being allowed to tweak cookie-cutter services to fit their own needs. Janie Kobes, a planner in Conroe, Texas, was offered an instant Web site - "just add your name here" - by her broker/dealer, Mutual Service Corp., of West Palm Beach, Florida. Kobes already had her own Web site, complete with her own domain name, and didn't want to give it up. She couldn't keep her site entirely separate, because the trading section of her site had to be supervised by Mutual Service Corp. So her broker/dealer worked with her to meld the two together. "They have the turnkey situation for people that need it: one, two, three, and here's your site, all in a box. But for people who aren't in the box, they let you show your individuality," says Kobes. "I used all the parameters of their site, but was able to tailor it my way. That's the kind of flexibility I like."

Marketing help. Yet services in their original cookie-cutter form aren't always a bad thing. Sometimes they can be just what planners are looking for, particularly in areas that hardly anyone seems to relish, like marketing. "Reps generally want broker/dealers that have a proven marketing and sales system," says Vessenes. "And broker/dealers want reps that have a proven marketing and sales system. Nobody wants to do the hard work of marketing." The industry attracts people of a left-brained, analytical bent, to whom marketing often does not come naturally, she says. Advisors want assistance. "There's a huge need for it, and I can't think of a firm that's doing it extremely well," she says. "A firm that provides a turnkey, cookbook kind of thing - 'Do A, do B, then do C' - will absolutely clean up."

Broker/dealers generally don't provide reps with a marketing cookbook because it's very hard to nail down what the ingredients are. About a year ago, Vessenes conducted a study about advisors' marketing techniques. At one firm, she interviewed what she calls the "marketing magnets": "the kind of people who walk into a mall, and people come up to them and say, 'Here, invest my money!'" She planned to find out what it was that they did that was so fabulous, package it up, and dish it out to the other advisors. But the "magnets" couldn't tell her. "Ninety-five percent of the time, they'd say, 'Well, we just try to treat our clients well.' That was it. They couldn't identify for me what they did."

Compliance help. Besides marketing, planners want their broker/dealers to help them make sure they're in compliance with the law. Some advisors don't like the idea of anyone peering over their shoulders, lips pursed and arms folded - but nobody is too thrilled about going to jail, either. "One of the advantages about my broker/dealer is that they're very nosy!" says one Raymond James rep who wished to remain anonymous. Her broker/dealer has the right to come in at any time and start shuffling through anything that's related to the business, and she doesn't mind. "Some people might be offended, but the broker/dealer has a right to do it," she says. "The assurance I get is that if I am in compliance with Raymond James, I am in compliance with the SEC."

Janie Kobes, the Texas planner, concurs. "Regarding compliance, people say, 'Gosh, having to go through all this garbage is so horrible.' But the fact is, this is the way business is done," she says. "I'd rather do it right, because in this business, even if it's perceived as wrong, it can hurt you." Kobes says the compliance expertise of her broker/dealer is particularly important to her because she is the sole practitioner in a single-planner office; knowing that she can call upon her broker/dealer for specific regulatory issues frees her to spend more time with clients.

With pressure from regulators increasing, many broker/dealers are stepping up their efforts to keep their reps in line, says Carol Sandstrom. For the most part, planners understand the need for stricter guidelines, more careful reporting, or more visits from regional supervisors. "I think they're all aware that the regulators are watching a lot more closely than they were," she says, "and when some big fraud case gets uncovered, that makes everybody nervous." Still, nobody likes grinding through busywork or being forced to jump through hoops. "The easier it is to do business, the happier the reps are," says Sandstrom. "If the reporting requires that a lot of manual forms be filled out and a lot of extra work, that causes some resistance." And by extension, firms that automate these responsibilities and take them off the planners' desks will have an edge over their competitors.

Access to the Big Cheese. Another perk that sets a broker/dealer apart is providing easy access to the top executives of the company. Reps, particularly those coming from large wirehouses, don't want to be considered just another number, nor are they interested in navigating layers of management to get things done. Often that's why they left those big wirehouses in the first place.

Sometimes the management of the broker/dealers doesn't even realize how important that accessibility is. "So, guys, what do you want from your broker/dealer?" asks Bill Kurinsky, vice president of First Montauk Securities in Red Bank, New Jersey, as he leans against the doorjamb of one of his broker's offices. "Commissions, commissions, commissions, right?" He laughs. Sanjay Saini, the broker, laughs, too, but then turns serious. "That's true - when brokers start out, it's all about the payout, how much they get," he says. "As they get into the business, though, other things become more important, like having access to management." John Lee, another broker, chimes in: "You don't want twelve layers of people that can't really do anything for you. Here, we can talk directly to the president ... and so can anyone in the organization. That open-door policy is really important."

Networking. The people-to-people factor doesn't apply just to broker/ management interaction. Advisors who work in small offices with maybe just one other planner also value the opportunity to get together with each other, to exchange ideas, trade success (or failure) stories, and learn how to solve the challenges they all face. "We find that they love to come to our conference every year because it's an opportunity to come out and talk to their peers, to find out what's going on in the industry," says Datalynx's Schweiss. Adds planner Kobes, "Mutual Service Corp. has national meetings that focus strictly on technology. Even if you've been to them before, you always learn something new, because technology is always changing."

Technology. Speaking of which, in the age of perpetual hype about the Internet, it hardly seems necessary to mention that planners are looking to their broker/dealers for help with technology - software, Web sites, downloadable forms, online order entry, the automation of routine tasks. As with individual planning firms, any broker/dealer that isn't writing the Internet into its business plan isn't likely to be around for long. "Lack of technology is one of the top reasons brokers leave to go elsewhere," says Sandstrom. The more technology and automation available, the easier the practice is to run. The easier the practice is to run, the happier the planner is.

Research and guidance. Being able to call upon the broker/dealer in a Dial-An-Expert capacity is another important feature reps look for. No one can be an expert in everything, and the problem is compounded when a planner is the only practitioner in his or her office. When clients come in with specific issues, it helps to be able to call up the home office and get pointed in the right direction, rather than starting to research from scratch.

"I had a case the other day where this person was 85 years old and wanted to do a deferred annuity that would be deferred for five years, after which it would change into an immediate annuity, and would be over joint lives," says Kobes. "Trying to find an annuity company that would do this would have been tough." So instead, she called her broker/dealer and let its research department do some digging. They called her back with two or three possibilities, and she took it from there.

Although trades can often be placed online, some planners still like to talk to a real person when placing trades. "For our business, you really need to talk to the broker," says John Cullen, a fixed-income trader at First Montauk. "Sometimes we'll spend 15 minutes on one conversation about 15 bonds. You don't really need to do that much, but they (the planners) want it. They want their hand held, and they want to know that they're getting a good execution and a good price." Cullen notes that many older brokers want to call in their stock trades, too, because the computer is somewhat foreign to them, they're more comfortable talking to a person.

Service! The most important thing planners want from their broker/dealers is a surprisingly simple, surprisingly old-fashioned thing: good service. "The number one reason why reps leave their broker/dealer is lack of service, the same old complaint that's been around for years," says Sandstrom. Paperwork that disappears, trade executions that are slow, phone calls left unreturned - all are relatively small things, but when they pile up, it only takes one more straw to break the camel's back. "I have had brokers calling me saying they wanted to leave because they've actually had to have one or two staff people whose full-time job was resolving problems!" says Sandstrom. "That's usually the breaking point, when solving problems takes that much away from the work they want to be doing."

"What it all comes down to," she concludes, "is that they're really looking for a way to get their business done with the least amount of grief."

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