From the May 2011 issue of Investment Advisor • Subscribe!

May 1, 2011

Catching up with… Joe Richard

Wall Street Financial Group

“The difference is we’re smaller,” says Joe Richard, when asked what, specifically, Wall Street Financial Group does better than anyone else. Their size, he asserts, allows for a flexibility and selectiveness that’s difficult to find at a larger firm. And, of course, it’s about the culture: a family atmosphere where he knows each rep and knows them well. This means they don’t look to traditional recruiting sources, and that suits them just fine.

Richard, a veteran of the wholesaling side of the business, has been with the firm for nine years. He sat down with Investment Advisor for a candid chat about life at a small, successful firm.

Broker-dealer recruiting expert Jon Henschen said 2010 was “the year of going nowhere” for reps. Do you agree with that assessment?
If we had this conversation in June 2010, I would have agreed with him wholeheartedly. But in the second half of the year we saw things pick up. From an activity standpoint we really started seeing things happen in September.

What do you attribute it to?
It’s a combination of things. If independents decided they wanted to make a move in 2007, 2008 or 2009, it wasn’t a time you wanted to change broker-dealers. The country was in a recession and the last thing you wanted to do is go back to your clients and tell them you made a change. At that point they’d start looking at statements and see that they were down 30% or 40% because of market conditions. The other reason is that advisors were waiting to see what the landscape looked like after conditions started to turn around.

What about revenue from existing reps? Are you seeing revenue per rep increase, decrease or level off?
We’ve always seen revenues increase organically, but certainly from an average production per rep standpoint, I would say since about September 2009 things started picking up again for us. We’ve been in a growth mode for almost a year and a half. We have a little less than 200 advisors throughout the country. And we take advantage of that.

Do you plan to stay that size?
I’ll tell you we never want to get so big that I don’t know what that number is. I think we’d be comfortable at 250. I think we’d be comfortable to 300. I don’t know how much bigger than that we would be based on the fact that it would differentiate someone’s broker-dealer experience when they’re with us. It’s the relationship. We take the time to get to know them and how they’re looking to grow their business. Coming back to recruiting, we don’t need to recruit 60 or 70 new people a year because we’re not losing anyone, at least not anyone that we don’t want to lose. I’ve been here almost nine years and in that time we’ve lost less than five people that we didn’t want to lose. Because that attrition rate is so low we can be very selective in our recruiting.

Do you go after wirehouse reps?
It’s not where we are focusing. Even though everybody was talking about breakaway brokers, and that was certainly the hot trend, that wasn’t the best way for us to spend our time. There were firms out there that could matriculate a wirehouse broker into an independent advisor using incubators and all that. One of the biggest factors in whether someone’s going to be successful in making the jump is culture. Payout is payout, and everybody knows they’re going to make more money than they were at the wirehouse. The key is integrating into the culture.

What about the other independent broker-dealers that got themselves into trouble? Did you pick up anybody from there?
Yeah, we have. But what I said about being selective, you don’t want someone who, for example, sold med cap. The fact is E&O carriers have said they’re not going to cover it. E&O complaints being made on a per claim basis on your policy, if you don’t have coverage, even though they didn’t sell them while they were with you, you’re on the hook and they’re on the hook with you.

What are your views on the fiduciary front with the whole industry SRO issue?
I think it was good [FINRA CEO] Richard Ketchum attended this year’s FSI OneVoice Conference. The fact that they were able to get him there and he was engaging I think is good. There’s just so much work to be done. It’s difficult when regulation is made because the most frustrating thing is obviously the unintended consequences. It’s simply an uphill battle when dealing with regulators.

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