It's not easy to change your broker/dealer. When readers cast their ballot for the magazine's annual Broker/Dealers of the Year honors (voting in June; results in September), the answers they give on our survey reveal a lot about what advisors like--and don't like--about their broker/dealers. Among the ballot's questions is one asking where reps would go if they were to consider moving to another B/D. While there are a number of great B/Ds around, three firms are consistently mentioned in that balloting. In this, our launch of a regular monthly department which will focus on the independent broker/dealer universe, we thought it might be helpful to take a closer look at those three firms.
In alphabetical order, the three are Commonwealth Financial Network, LPL Financial Services, and Raymond James Financial Services. Each firm has its own strong and distinct culture but shares some traits that may explain why they are the ones advisors think of first. According to the 2005 IA Broker/Dealer Directory, all three are among the 10 biggest B/Ds by gross revenues. LPL and Raymond James are among the 10 biggest by number of representatives; and LPL and Commonwealth are among the 10 fastest growing as measured by number of representatives.
What sets Commonwealth apart are technology, a nurturing, sharing community, and the luxury of being privately-owned, says Joseph Deitch, chairman and CEO of Commonwealth Financial Network, in Waltham, Massachusetts and San Diego. His goal is to provide the means for advisors to "leverage their time and talent" in an environment that is enjoyable and nurturing. "We're on the short list of firms that have all the cool stuff," says Deitch, including a hosted technology platform, accessible from anywhere, anytime. If an advisor has a technical problem, "we can take over their computers and fix it for them."
The average advisor at Commonwealth has "15 to 20 years of experience," and average production is $250,000, according to Deitch. But Commonwealth turns down about 40% of the advisors that want to join, and they won't bring aboard a big producer who is not a good fit for the community. "We demand that they act responsibly and we hope they act compassionately. Sometimes it's not the right fit, and when that happens we try to recognize it and then we part ways."
Janice Hart, VP, national field development at Commonwealth, adds, "We want extraordinarily nice people to do business with--a high-end advisor who is doing the right thing for their clients, and [is] a blast to be around."
With St. Petersburg, Florida-based Raymond James, advisors have several types of affiliation to choose from, and a family culture. Raymond James Financial Services Chairman and CEO Richard G. Averitt III says he wants to "build, manage, and lead a profitable firm that the best financial advisors never want to leave." He looks for leadership in an advisor. "We also want a zeal for service, the kind of advisor who does, in fact, put serving his or her clients first, and is eager to provide the service, not just talk about it. Sometimes service goes beyond the client--service back to the community, to civic and charitable organizations. While none of that does anything for firm results--it's the kind of person we want."
But change is sometimes required. While "regretted attrition," the loss of advisors that the firm wants to retain, has been low--less than 1% since 1990--Averitt notes there are times when it is appropriate to ask big producers to leave. In the past year, six Chairman's Council members have been asked to leave. "Chairman's Council is only [the top] 2% of the sales force--to fire six producers in the $1 million to $3 million range is not something most firms would do," Averitt points out. "The old adage that 'If you do enough business you can do anything' doesn't exist here."
LPL's 6,700 advisors are, says Boston-based Bill Dwyer, LPL's managing director of national sales, the "largest true melting pot of the industry--the other side of that is you get a tremendous diversity of how advisors want to do business."
Dwyer says LPL, which has its main home office in San Diego, can help advisors run a more profitable practice, "63% more profitable than peers," because LPL has a dedicated clearing platform, model portfolios, and supportive technology--they use straight through processing (STP), and Dwyer says all of those elements lead to time savings for advisors.
In 2002, LPL bought a trust company, in 2003 a mortgage company, and in 2004 a general insurance agency. If advisors come to LPL with their own trust company, for instance, they can use it, but if they don't, they can use LPL's to meet clients' trust needs. "Ironically, the more diverse the client need is, the less time an advisor has to go out and become an expert in all of these things," explains Dwyer.
What these three firms offer, depending on how you look at it, is either the best of all worlds, or the best kind of compromise: all offer great flexibility, well thought-out processes and systems, and supportive culture. Advisors can use the B/D's infrastructure, yet still retain their entrepreneurial style.--Kathleen M. McBride