More On Legal & Compliancefrom The Advisor's Professional Library
- Whistleblowers A whistleblower is any individual providing the SEC with original information related to a possible violation of federal securities law. The Dodd-Frank Act established a whistleblower program that enables the SEC to reward individuals who voluntarily provide such information.
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
(Phoenix) Some 750 financial advisors affiliated with Commonwealth Financial Network, along with 650 other guests and staff members, gathered in Phoenix at the JW Marriott Desert Ridge Resort & Spa in late October for the independent broker-dealer’s national conference. Commonwealth now includes about 1,400 advisors with $59 billion in assets under management.
Commonwealth advisors have $30 million in assets on average and $310,000 in yearly fees and commissions. “We are continuing to move up to $500,000 [in fees and commissions] per advisor and $1 billion in firm assets,” said CEO Wayne Bloom, during the conference. “This year, we’ve been talking with lots of big offices [about joining us] and are keeping focused on our high-quality service, technology and practice management.”
Net advisor recruiting in 2009 was 140. For 2010, that figure should be down somewhat, as is the case for broker-dealers across the industry, company executives say. In general, Commonwealth aims to grow by about 100 advisors a year. It has four recruiters who are employees and aren’t paid on commission.
“This year, advisors aren’t talking about the sky falling. They’re catching their breath,” said Andrew Daniels, managing principal, field development, for Commonwealth Financial. “They’re looking at their same firms with the same warts and asking, ‘how can I make a change?’ And over the past few months, we’ve had a growing number of contacts and visits.”
“We keep very engaged with about one-third of the advisors that call us. They have to be Commonwealth-quality advisors,” said Bloom, who is based in the broker-dealer’s Waltham, Mass., headquarters. Often, it’s just a question of being patient, he explains.
“Many advisors tell us, ‘I’ve been getting your materials for years and finally decided to call.’ One advisor that recently joined, for instance, went through a five-year recruiting process,” said Bloom.
“And after they join, they say, ‘If I would have known it would be like this, I would have done this earlier!” Daniels said. “This is very reassuring.”
In terms of advisors joining from the wirehouses, this group accounted for about 15 percent of last year’s recruits, says John Rooney, managing principal for Commonwealth in San Diego. This figure could be higher, he adds, but Commonwealth isn’t interested in picking up advisors that are being pushed out because of low production.
Remaining recruits come from national and regional firms. “They are looking for good fee-based platforms, for instance, and have been well trained as wealth managers,” Rooney said. “And many have felt hamstrung by the platforms at their old firms,” added Daniels.
To make its platform as robust as possible, Commonwealth expects to have invested $20 million in IT by the end of 2010, according to Bloom. “Advisors can perform better if you deliver more efficiency to them and help make them more effective,” he said. “And take the annoyance factor out of the system,” shared Rooney.
“Some broker-dealers force the financial advisor to change,” said Daniels. “We ask the financial advisor what change he or she wants to make, and then work for them to make it happen. It’s commonsensical.”
In a recent survey, J.D. Power & Associates found that Commonwealth scored highest in overall satisfaction among independent advisors with a score of 898 on a 1,000-point scale. Its advisors say it performs particularly well in perceptions of financial stability and operational and compliance support.
The independent BD is “tremendously honored and humbled” by the high approval rating and by the fact that its independent contractor representatives “took the time” to complete the J.D. Power survey, said Daniels in a phone interview in late October. The firm, he added, wants to grow at a “careful rate that continues to service the Commonwealth community … [since] we don’t want to be the biggest, but the best.”
William Leeb, CFP, of Financial Council in Towson, Md., joined Commonwealth in April 2009 from FSC Securities/Advantage Capital. This was during “the depth of the [market] chaos,” he said during the national conference. “We had two daunting tasks: Focus on clients and change broker-dealers with our 2,500 accounts.”
The transition was seamless, he says. “You can’t imagine. We had 95 percent of the assets moved within 30 days. It was done like clockwork. This was the beginning of our official relationship with Commonwealth.”
Leeb was starting this relationship while both helping his father — a staff member of Financial Council — retire and restructuring his RIA, which included plans to add two employees. “Commonwealth has been very supportive and service-oriented,” he said, “at a time when the industry’s really gone the other way. They are truly committed to being our partner, and that we like. We get that sense every step of the way, and that helps us solve problems and help them [grow], too.”
As he has reorganized Financial Council, Commonwealth has supported his team with benchmarking and other tools. Much of this work has been done with the guidance of Joni Youngwirth, Commonwealth’s managing principal of practice management. “I’ve been making progress because I knew she’d follow up with me. And I can’t let Joni down. With Commonwealth, it’s not about less work but better work … They don’t stop and [they] have a deep commitment and dedication to improving how we do business.”
This thoroughness bodes well for the broker-dealer’s future, Leeb says. “They are focused on solving problems for advisors and not creating any of their own. They want to maintain the culture and scale their growth accordingly. It’s an amazing place that really has something special going on.”
In addition to attending education sessions and other activities at the JW Marriott during their recent national conference, nearly 100 Commonwealth advisors and staff volunteered at the Salvation Army in Phoenix to renovate the interior and exterior grounds (see photo).
This work included cleaning and fixing up the lounge and kitchen, painting murals, gardening, and sprucing up the children’s outdoor play areas with new mulch and picnic tables. Plus, to help celebrate Halloween, the team donated supplies for the children to carve pumpkins and craft holiday-themed art projects.