From the July 2014 issue of Investment Advisor • Subscribe!

At Triad, Being RIA Friendly Is Old Hat

The ‘friendliest’ IBD for reps with their own RIAs has 15 years of experience with hybrid advisors

Mark Mettleman asks, how do broker-dealers embrace reps who want to run their own RIAs? Mark Mettleman asks, how do broker-dealers embrace reps who want to run their own RIAs?

Many broker-dealers have moved over the past few years to accommodate their fee-based reps by adding a custodial platform so those reps can run their own RIAs. The objective? To both retain those often growing reps and their AUM—to keep them from going totally RIA—and to attract other reps whose business is heading in the same direction. At Triad Advisors, that accommodation has been business as usual for years: As of year-end 2013, 417 of Triad's 553 producing reps had their own RIA, or 75%, a much higher percentage than all of the independent BDs who responded to Investment Advisor's 2014 Broker-Dealer Reference Guide.

“At conferences I’d hear BD executives ask, ‘How do you accommodate or make an exception’” for reps who want to run their own RIAs, recalled Mark Mettelman, CEO of Triad, but “I took this as a ‘How do I embrace this?’ trend instead.” Triad, Mettelman said in an interview, was founded in 1998, but “we got our first ‘hybrid’” advisor in 1999, so “this is not a new business to us.” Rather, “we’ve been doing it a long time, and it stems from us wanting to attract very entrepreneurial types of advisors.”

That encouragement has again put Triad at the top of Investment Advisor's “Top 25 Independent Broker-Dealers by Friendliness to Advisors” list and is paying off, Mettelman said, in attracting not just entrepreneurial reps but also increasing the average revenue per rep. These are advisors who not only “want their name on the door,” Mettelman said, but also are moving along the path of offering family-office-like services to their clients. “To do that, you need lots of different products and services to accommodate your client needs,” he said, though even with Triad's “comprehensive menu” of offerings, “not every solution will be on a fee basis,” such as some fixed income or alternative investments, where “it can be more appropriate to charge a client a commission.”

Triad ensures, however, that “everyone's coloring within the lines on compliance,” whether they’re using Triad's clearing services, corporate RIA or their own RIA. When it comes to reps having their own RIAs, Triad has “always embraced the notion that this is our business” as well. “Many years ago we built the data feeds from the custodians,” Mettelman said, and “we treat it as if it's all Triad business.”

Using Triad's compliance staff for their RIA business “makes the independent advisor feel like he or she is part of something bigger, has more resources” and provides due diligence backup as well for the dually registered advisors.

In its recruiting efforts, Mettelman said the RIA focus “definitely resonates,” attracting bigger advisors who’ve helped Triad increase its average revenue per advisor from $224,000 as of year-end 2012 to $281,000 at year-end 2013 (see the “Top 25 Independent Broker-Dealers by Highest Average Production” list on ThinkAdvisor.com). “It's rare that you find somebody is all fees or all commissions,” Mettelman said, adding that a “higher end planner,” who may be “frustrated with their current broker-dealer,” can be attracted to Triad's “more open architecture model” where instead of arguing that “fees or commissions are better, we say, ‘Here's a wealth management offering.’”

Many observers of the independent BD space like to say that with its low margins and higher costs for compliance and technology, the industry may only be healthy in the future for very large firms with scale or small firms that can retain their boutique culture. Triad is squarely a mid-sized broker-dealer, but Mettelman suggested that its focus, and its parent company, changes the equation. As part of Ladenburg Thalman's three IBDs, he said Triad reps have access to products and services that are more common among wirehouses and big regional firms, such as investment banking, research and access to syndicated investment vehicles. In addition, Ladenburg Thalman owns Premier Trust, a trust company that is friendly to advisors. “We’re pretty unique in the independent world,” Mettelman said, in being able to provide those services to reps but also in having an owner with “deep pockets behind us; that takes the question of financial stability and staying power off the table.”

By Friendliness to RIAs

This list shows the percentage of representatives that have their own RIA while also doing work through a broker-dealer, which represents both a defensive (retention) and offensive (attraction) strategy for BDs. This group of dually registered advisors remains the fastest growing segment of the advisor population, though new regulations from the Department of Labor or the SEC might have an effect on that growth. This friendliness to reps having their own RIA may well serve the interests of the broker-dealer as well, who can retain the rep’s brokerage business while “allowing” the rep to grow his or her fee business.

Rank

Company

Rep With Their Own RIA

CFPs in Total Rep Force

Average Years Experience (per Advisor)

1

Triad Advisors Inc.

75.4%

NA

19

2

Royal Alliance Associates Inc.

39.4%

NA

19

3

Securities Service Network Inc.

38.6%

NA

10

4

United Planners Financial Services

32.2%

NA

15

5

M Holdings Securities Inc.

28.2%

12.9%

NA

6

American Portfolios Financial Services Inc.

22.9%

11.5%

18

7

Kalos Capital

21.0%

6.2%

20

8

FSC Securities Corporation

20.1%

NA

NA

9

First Allied Securities Inc.

20.1%

20.2%

19

10

LPL Financial LLC

17.9%

NA

15

11

Cambridge Investment Research Inc.

16.8%

NA

18

12

Capital Investment Companies

15.8%

11.2%

NA

13

Securities America Inc.

15.5%

27.8%

NA

14

Independent Financial Group

14.2%

14.6%

17

15

Crown Capital Securities L.P.

13.8%

22.9%

18

16

Geneos Wealth Management Inc.

13.5%

NA

20

17

ProEquities Inc.

12.8%

NA

NA

18

LaSalle St. Securities LLC

12.3%

9.0%

15

19

Commonwealth Financial Network

11.4%

46.6%

NA

20

National Planning Corporation

8.7%

NA

NA

21

Girard Securities Inc.

7.9%

32.0%

18

22

SagePoint Financial Inc.

7.2%

NA

NA

23

Investacorp Inc.

6.7%

31.3%

10

24

Harbour Investments

6.1%

17.9%

20

25

H. Beck Inc.

6.1%

17.2%

NA

All data is as of Dec. 31, 2013, and was supplied by the broker-dealers themselves. Investment Advisor has not independently confirmed the data.

Correction: Due to a miscalculation, some broker-dealers were inadvertently left off the list of the top 25 based on friendliness to RIAs. The table on this page shows the updated list.

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