The base of the Rocky Mountains set the stage for Cambridge Investment Research’s Premier Club Conference on Monday, a gathering of the broker-dealer’s top producing reps. Despite the scenic Colorado view, the meeting began on a somber note, as chairman and CEO Eric Schwartz eulogized marketing and recruiting head Jim Guy, who died April 5 after a brief illness.
“Jim’s death was a shock to us all,” Schwartz said in halting tones. “He was a great friend, a great partner and a great advisor.”
Schwartz noted that even though Guy served at the senior executive level, he continued to operate his independent advisor practice.
“When he moved his practice to us, it was not only the largest we had at the time, it represented 10% of our GDC,” Schwartz recounted of the firm’s early years. “He started with two people in the marketing department, and we have 75 people in marketing today.”
“He was building Cambridge to be even better after he was gone, which is my vision as well.”
Schwartz then moved into a discussion of what he called “the good stuff” happening at the firm. Among the points he cited:
- Fees and commissions—It’s almost a 50-50 split as to incoming revenue from each, although he noted it was “a little more fee.” He added that it positions the advisors well, and far from shying away from commissions, he believes they are just as effective as fees “as long as the advisor is acting in an ethical manner.”
- Senior management—He noted that he and Guy had begun working on a succession plan three years before Guy’s death. “We wanted to have a team in place when Jim decided to step down, and not have to scramble to bring someone in from the outside.” Schwartz also revealed that he has begun transferring his stock to other managers in the form of ESOP plans to retain staff and ensure the firm’s continuity and philosophy. This will mean that “in 15 years or so,” his ownership in the firm will be reduced from its current 89% to 51%.
- Financials—More and more reps want to see that the firm is financially stable, especially since so many smaller firms are in trouble.
- Diversification of advisors—This extends to the type of business model they employ, as well as the products they sell.
- Succession planning—“We want to be a leader in the industry when it comes to succession planning funding and expertise,” Schwartz said. “Succession planning allows you to be better today."
Schwartz then moved to a discussion of the industry’s big trends.
“The trend toward fees is increasing and will continue to increase. Again, we are not opposed to fees or commission. The advisor can use either as long as they are acting in an ethical manner.”
He added that if attendees in the audience are thinking the regulatory burden for advisors couldn’t possibly get heavier, they would be wrong.
“Whether the markets go up or down, there always seems to be the need for more regulation,” Schwartz wryly noted.
He then pointed to the industry’s transformation from a cottage industry to a major industry as it gains more revenue and acceptance, and listed some of the things the firm must do to keep getting better. These included:
- Maintaining and enhancing the independent ownership structure, culture, integrated technology and service at the firm.
- Succession and acquisition—“Selling is what you do when you have no plan.”
- Helping advisors achieve their unique vision.
He concluded by listing in rapid-fire succession (for Schwartz) the things advisors must do to stay relevant and grow their businesses.
“You have to see the big trends and get out in front of them. Once you see them, don’t repeat the same behavior over and over again; rather, adapt to the trends. Know yourself and do what you do (and love) best). Realize that no one is successful alone. As I heard Ron Carson once say, ‘Culture trumps strategy and culture plus strategy trumps all.’ Build something bigger than you. And lastly, live long and prosper.”
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