From the December 2006 issue of Research Magazine • Subscribe!

Treating Reps as Friends

This being my first time in Atlanta, I'm at the mercy of my host as far as lunch is concerned. Fortunately, Joby Gruber is a born and bred Atlantan. Plus, he has a good rule: When visiting his reps around the country, a dinner must be at a regular restaurant, not a chain.

Dailey's clearly meets this requirement. Atlanta is a fairly new city -- it was burned down by the Yankees, after all -- but Dailey's is located in an old building downtown. Its remodeled d?cor is elegant and unpretentious, and the staff is brimming with goodwill. The Southerners sure know how to treat you like family.

Which seems to fit in with Gruber's principle of running his business. He doesn't neglect the fact that FSC is part of American International Group. But he seems less interested in technology, products and advisory service platforms, and more in the personal aspect of helping the company's financial advisors.

On the way to the restaurant from the Marriott Marquis, the venue of the FSC National Education and Business Conference, we run into some attendees -- a top producer who runs his practice with his wife and daughter.

"We just saw Ted Turner," they joke. "He's giving us all his money to manage."

"Good for you," responds Gruber. "How come nobody ever asks me whether I have a financial advisor?"

He has used this line before, he admits. It is true. In all the years he has worked with financial advisors, none has asked him that question. "But it occurs to me to ask them whether their business is as successful as they want it be," he says.

Gruber likes to frame his relationship with his producers not so much as a broker/dealer vs. its reps but one business owner to another. People sometimes don't realize how fiercely independent and entrepreneurial independent advisors really are.

"They may call themselves financial planners, advisors, whatever," he says, "but what they are is small business owners."

The firm's 1,600 reps come from wirehouses, insurance, accounting, but their practices, consisting typically of two to three producers and up to seven support staff, are small businesses. Being in control is what they want, and Gruber sees the role of the broker/dealer as catering to this mindset. For example, the firm pays commissions on a weekly basis, giving producers control over cash flow.

Financial advisors coming to FSC are typically seasoned professionals in their field -- the broker/dealer is not set up to train newcomers -- but they are often neophytes as far as managing their own business is concerned.

The firm does a lot of hand-holding for those who are just starting up, but even experienced independents may encounter difficulties. The business environment is getting progressively more complex, the cost of medical insurance and other employee benefits is rising and back-office functions are becoming more onerous.

To say nothing of the cost and time involved in meeting regulatory requirements. Gruber says it is not unusual for a producer to spend about 25 percent of his or her time providing financial advice and 75 percent running the business, handling compliance issues, etc. The regulatory climate is unlikely to get easier. FSC has a pilot program in place, in which the broker/dealer takes on a substantial portion of the reporting burden -- free of charge. In return, the producer pledges to increase production by a set percentage. It's a division of labor right out of classic economic theory -- market players concentrating on what they do best.

Or, to use Gruber's football analogy, the broker/dealer is like an offensive linebacker, plowing the field for the running back. In this business, the ball carrier is the financial advisor, of course.

Gruber is a sports fan, but the analogy he uses even more often is derived from medicine.

"We pattern our firm on the television show E.R.," he says. "It is set in a teaching hospital. We like to think of ourselves as a learning broker/dealer."

Listening and learning from financial advisors is why FSC holds its annual conference in Atlanta, a short drive from where the broker/dealer is headquartered. This allows reps to meet people they spend so much time with in daily telephone contact -- and to air concerns at every level.

Gruber does a half-hour presentation at the beginning and circulates in the halls. But he also holds meetings at a penthouse suite he rents for the conference -- to get the feel for what the reps are thinking. Despite being the CEO, he still calls himself a customer service representative,

His example of how he likes to respond to his reps' needs comes from this year's top producer meeting in Hawaii. Of the 125 top producers in attendance, 17 were female, and three or four of the firm's top five producers this year are likely to be women. It is a sea change occurring in recent years.

"What we found," says Gruber, "is that women financial planners want to network with other women -- others who broke through the glass ceiling. As a result, we created a network that helps them explore their role as financial planners and as women financial planners."

The medical analogy comes up again when Gruber mentions that financial planners can be at their worst when planning for themselves. They can focus their clients on setting goals and preparing for future contingencies, but they often neglect to do so for themselves.

Gruber does a lot of listening, on the phone as well as in person. One of the themes of his introduction at the conference was success. When he goes to visit clients, he wants to understand how his producers define success, in business as well as in personal life. "Over the years, many producers have gone from being just reps to becoming friends," he says.

When FSC works with reps to ensure continuity in the business, that the practice is protected against catastrophic events such as death or disability of the principal, Gruber says it can be seen two ways. Yes, the firm is trying to safeguard itself against the loss of production. But it is more than that. "In life, you would want to protect a friend against making a mistake, to encourage him to do what's best for him and his family," says Gruber.

Gruber sees FSC as a small business within a very large company. He wants to convey to his reps that they are getting the best of both worlds -- highly personalized attention from the broker/dealer, but also the full range of resources of a powerful parent: resources such as AIG Financial Products, for example -- a Connecticut-based company active in a wide range of derivatives and structured product markets in the U.S.

How to make reps feel the full heft of the broker/dealer? At this year's conference, Gruber had as keynote speaker none other than Alan Greenspan, talking off the record about the U.S. economy and Fed policy. It carries a lot of weight with clients if their financial planner has heard something from the horse's mouth, so to speak. And has a picture with the legendary Fed Chairman to back it up. But it doesn't hurt that the reps realize what kind of speaking fees Greenspan commands. It's a small fortune, but as far as Gruber is concerned, it is money well-spent.

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Who: Joby Gruber, President and CEO, Advantage Capital and FSC Securities

Where: Dailey's Restaurant, Atlanta, Oct. 20, 2006

On the Menu: flank steak sandwich, turkey meatloaf and help for the small business owner

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Alexei Bayer runs KAFAN FX Information Services, an economic consulting firm in New York; reach him atabayer@kafanfx.com

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