From the June 2007 issue of Boomer Market Advisor • Subscribe!

Investors Capital Corp. President Tim Murphy on the value of superior service

Like many broker/dealers, Investors Capital Corp. is investing heavily in the packaged wealth management platform it offers reps. Unlike many broker/dealers, the Lynnfield, Mass.-based firm is working with the Ritz-Carlton Company to train its staff in high-end service. It's all part of a concerted effort to swim upstream with the reps and clients the firm partners with. President Tim Murphy spoke with Boomer Market Advisor about his service initiatives, the new deal with Albridge Wealth Reporting and the value of unified managed accounts within the broker/dealer.

Boomer Market Advisor: We hear a lot of reps complain about the quality and knowledge base of their broker/dealer back-office staff. What initiatives have you taken to ensure your staff is first-rate?
Tim Murphy: We've been very cognizant of our rep-to-staff ratio. Right now we're about 5.5:1. This may not be the lowest out there, but more importantly, it's really about the quality and knowledge on the part of our staff. We've continued to train our service staff in partnership with Ritz-Carlton. We have our second annual Ritz-Carlton training event this summer. This helps reinforce the high-end service we provide. New Ritz-Carlton exemplary service initiatives are also being put in place.

BMA: Do they always get a human voice when they pick up the phone, or will it be a recording a promise to call back?
TM: We have group call-in. When you dial into operations, you're dialing into 15 people. We've got service numbers broken out by department. They're always going to have somebody live to pick up the phone. One thing that we're focusing on is ASA -- average speed of answer. We want to focus on drilling that number down as low as possible. It's my belief that some of what we do in this business is reasonably commoditized. We all have the same products, high payouts and clearing firms; it's how you service your customers that really differentiates your firm. I was on the phone with somebody who joined us recently from a very well-known firm. He couldn't believe the level of care, not just service, that we invest in him. He said, and I quote, "It made me love this business again." Our reps are the ones who drive the success of this firm, not the other way around. It's our job, our obligation, to provide them with the tools, the support necessary for them to become more efficient, more productive and better advisors.

BMA: Are you looking at offering some kind of UMA or overlay capabilities?
TM: It's funny you'd mention that. Overlay management is getting discussed out there. To really provide a true unified account you need to look at overlay management. I began to look at it recently. The growth of SMAs, from what I've seen, is really occurring at the wirehouse level. I question the assets that are being raised within the independent model. I'm not saying they're not being raised, but I don't think that there's a significant asset growth when compared to the overall percentage of asset growth at independent firms.

BMA: So the percentage of assets at broker/dealers might not be high enough to make the math work?
TM: Yeah, that's exactly the point of reference. SMAs have garnered a lot of press attention. I think all of us in the industry are looking at SMAs, but I don't necessarily know that there's significant traction in our business yet with them. They're good for discussion, but are they really practical? Even if you look at a large independent broker/dealer and compare them to a wirehouse, their percentage of SMA assets is still pretty insignificant. I do think there's an opportunity for certain clients, but I think it's predominantly in mutual fund wraps and maybe some separate accounts.

BMA: So is the unified overlay capability the answer to improving those percentages?
TM: I am still looking at it, but yes, I think you're getting a bit more efficiency in the trading and taxation and bringing the minimums down to where the math works. I think the average account size in firms similar to ours is around $200,000. To really get proper diversification within a UMA, you're probably looking at $500,000 or $700,000. The average American isn't walking around with $750,000 liquid to invest in a single account. So it's on our radar. I think our primary success right now on the fee-based side is providing asset management solutions to a rep. Reps want to be more involved in the process these days because they believe that's the value they bring to the client.

BMA: How did the Albridge deal come about and what are you looking to get out of it for your reps?
TM: We had been with Investigo for two years; great people, good products. It's interesting because I think Investigo suits smaller firms better and Albridge happens to be better for wealth management with larger firms. What we're really looking to do is to raise the quality of all the asset tools we offer at our firm.

BMA: A lot of the larger firms are offering wealth management platforms in-house. Why the decision to outsource?
TM: If you look at Albridge's clients, it's a lot of the larger broker/dealers. Some of the larger firms have developed their own in-house solutions, which I think is due to the fact that technology gets cheaper as time goes on. But that build vs. buy question is still relevant. However, we're looking to partner with the best of breed products and then look for integration across products, rather than trying to bundle everything. For instance, Albridge is the leading wealth management reporting tool. I won't say it's the one thing they do well, because they have other products, but a primary core function is reporting wealth management; they do that extremely well. The quality of the reports is phenomenal. The data is terrific. Their support so far has been top notch.

BMA: What's your take on the NASD/NYSE merger?
TM: I think that there'll be certain efficiencies gained by the merger. I don't think it's necessarily going to change the way our firm is regulated; nor, for that matter, most of the firms out there.

BMA: So all of these arguments about distribution of assets, how the board members are selected and some of the other objections that were raised, won't have an overall impact on your business?
TM: Quite honestly, and perhaps I'm na??ve, but I don't necessarily think that it is going to have a significant impact one way or the other. My job is to run my business and this firm by the rules and in compliance. If the rules change, which they have dramatically over the last five years, we'll have to adjust our business practices accordingly. And we'll continue to do so.

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