From the July 2008 issue of Boomer Market Advisor • Subscribe!

Should I stay or should I go? When is it time to break the chains in your broker/dealer relationship?

What factors play into an advisor's decision to change broker/dealers? Three of the biggest are service, compliance and culture. Does your current broker/dealer measure up or fall short? The answer could determine your next move.

Ed Grogan had an issue with his broker/dealer-provided Web site one day, and he needed answers. He sent an e-mail detailing his problems to the appropriate person. In short order, he got the answers he needed - plus a little more.

"I got a reply complete with captured screen shots to walk me through it," says Grogan, president of Summit Financial Group (www.summitplans.com) based in Gig Harbor, Wash. He adds that at Commonwealth that level of service is normal, and it was something he didn't get at his old firm.

Advisors re-evaluate their relationships with their broker/dealers all the time (or they should, anyway). And because of their evaluations, advisors look to change broker/dealers for various reasons. Three seem to stand out from the rest: compliance hassles, a change in culture and, like Ed Grogan's impetus for change - service.

Service
"I wanted a level of service I was not getting at my former broker/dealer," Grogan says. "I wanted to be with a broker/dealer that is focused on service to its advisors rather than one with product."

Jon Henschen, president of Henschen & Associates (www.findabrokerdealer.com) in Marine on St. Croix, Minn., sees the service factor come up all the time in his work with advisors. Henschen, who specializes in helping advisors find the right broker/dealer relationship, says the service dynamic becomes more important to advisors as their practices grow because they need better time management in order to spend more time with clients.

"They look for ways to save time," Henschen says. "To do that they want and need practice management and marketing services from their broker/dealer."

Grogan says meeting the service demand can be as simple as instant communication. "When I call, I want someone to pick up the phone and answer my questions."

Beyond that, broker/dealers should be able to provide services like staff training, marketing support, seminar platforms, brochures and branding assistance, just to name a few. In addition, part of the service equation is technology. What can a firm do with technology to make advisors' lives easier? The importance of this depends on an advisor's comfort level with technology and how much he or she uses it.

Conformity
Compliance is the issue of the day no matter what day it is. It's a hindrance today, helpful tomorrow. Advisors and broker/dealers do the best they can with it, but sometimes compliance provides the friction that causes producers to look elsewhere. Advisors shouldn't be looking for compliance departments full of yes-men, but they also don't want a compliance department that acts as a roadblock. Broker/dealers try to walk this fine line.

Based in Omaha, Neb., Scott Carlson is regional vice president for Woodbury Financial Services (www.woodburyfinancialservices.com), headquartered in Woodbury, Minn. He says broker/dealers that understand advisors' compliance frustrations try to do a couple of things. First, they don't just say no to marketing materials and kick them back to the advisor.

"If we say no, we show them how to bring it into compliance," Carlson says. We also show them how it can hurt them. We use real stories of times when something has gone bad."

Grogan likes that approach and says the compliance department at Commonwealth does that.

"I'm a fan of compliance, and I'm a fan of common sense," Grogan says, adding that his compliance department has that trait. "Provide us an explanation of why or why not, and we can understand."

Second, advisor-centered broker/dealers keep the advisor-compliance relationship from becoming adversarial - without becoming rubber stamps. Carlson says Woodbury has a compliance specialist for each of its territories so advisors can get to know their compliance person.

"We want there to be a rapport," he says.

Advisors and compliance officers are on the same team; they should act like it and be supportive of each other.

Change in culture
A growing reason for advisor switching, something Henschen and Carlson have seen more of recently, is a change in culture at a broker/dealer, either through a change in managers, explosive growth or the sale of an independent broker/dealer to an insurance company. Henschen says the philosophies possessed by insurance-based broker/dealers and non-insurance-based broker/dealers are totally different, and many advisors don't want to have to change their own philosophies to fit in.

"Culture shock sets in," he says, and finding the right independent firm becomes job one, especially if service levels suffer.

Grogan felt exactly that, saying he didn't want an insurance-owned broker/dealer, especially one with thousands of small producers. He wanted a firm with fewer advisors who all had higher production levels.

Carlson says another example of a cultural shift - one he sees in the middle of the country - is when advisors in one region tire of being so distant from their broker/dealer's main offices. Advisors begin to feel like they are on an island, and that isn't conducive to personal or professional growth. In middleAmerica, some advisors are glad to find a Midwest-based firm.

"We encourage sharing ideas and networking between our reps," Carlson says, which is important for advisors who want to feel like part of a group.

Some advisors would rather feel more anonymous or remain a small fish in a big pond, taking care of what they can on their own and contacting their broker/dealer only when necessary. There are places for them. It is up to each advisor to determine the right level of service, appropriate compliance scrutiny and the best culture in which to thrive. How individuals analyze the factors is up to them, and the end result will vary widely, but the answers are always limited: Stay or go.

Is it the screen shots that walk a person through a problem that matters most, or is it the desire to be left alone? That's a tough call.

Perhaps Grogan sums it up best: "When we were talking about our broker/dealer as a hindrance more than an asset to our business, we knew it was time to rethink that relationship."

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