Of the many ways to go independent, one Merrill advisor found his bliss at an RIA/independent broker-dealer affiliate that he credits with tripling his revenue.
“The advisor was doing $450,000 of gross revenue, which at Merrill means he keeps about $150,000 of that — 40% give or take,” says William Hamm, CEO of Independent Financial Partners (IFP), one of the nation’s largest RIA firms.
Hamm, in an interview with ThinkAdvisor, explained what changed in the former wirehouse advisor’s transition to his status as an independent working through IFP, an LPL affiliate.
“There were accounts at Merrill Lynch that he wasn’t getting paid on but now he could once in an independent channel. Moving to our platform opened a number of retirement plan opportunities because now he could be a fiduciary on the plan; and third, captive insurance … opened up another line of revenue generating services.”
The result is that, four years later, the former wirehouse advisors is producing about $1.4 million in revenue.
Hamm shows a desire to be fair in sizing up the matter by saying that “this advisor would have grown regardless of whether he was here or corporate [i.e., part of LPL’s general network].” But he adds that the advisor “keeps telling me joining IFP was one of the best decisions he ever made.”
Whatever the relative merits of going independent through a large broker-dealer network or joining a firm within a firm through a hybrid RIA, IFP would appear to be doing something right.
In 2013 the firm grew to $5.2 billion in client assets under management from $3.3 billion the year before. Natural growth based on the stock market’s nearly 30% gain last year would not have added more than a billion dollars — actually less, considering the reality that clients don’t typically own 100% U.S. equity portfolios. So most of the firm’s robust gains must have come from its adding of new advisors.
Indeed, Hamm says the firm brought on between 55 and 60 new advisors, bringing the Tampa-headquartered firm’s total number of advisors to 475 nationwide. And that, he says, is less than the 85 to 90 advisors IFP averaged the previous three years.
“We took a break in recruiting last year because we completely changed our technology and back-office programs,” Hamm said.
Those additions include a new compliance system that conducts surveillance on all custodial accounts and produces exception reports if rules are broken, as well as paperless sytems that allow advisors to conduct all business with clients end-to-end electronically, where “no paper touches anyone’s hands,” Hamm says.
But though the technology pause produced fewer recruits, the new advisors have a higher production profile. Hamm says the new advisors average $330,000 in annual revenue compared with the previous three years’ average of about $235,000 in revenue.
“We’re making a specific effort to move in that direction,” he says.
Indeed, the IFP CEO is the firm’s chief recruiter, complementing a full-time recruiting and transition staff, and has recently been talking to firms with seven-figure revenues. He says advisors come to IFP from across the wirehouse, independent and bank advisory spectrum (but only rarely from LPL itself — usually just cases where an advisor “has a specific business need,” such as joining an OSJ).
Hamm, who started IFP 14 years ago after having been an advisor for 30 years, says his goal was to create something he would have wanted as an advisor.
Those elements — the firm’s value proposition — start with a high payout. “We are one of the highest, or the highest payout in LPL,” he says. On commissions, IFP’s payout is “about the same” as LPL’s corporate BD (which ranges from 75 to 93%), but “3 to 4% higher than through LPL’s corporate RIA, and our platform has no administrative fees.”
IFP, whose advisor headcount is LPL’s largest (but third in terms of contribution to revenue), is also working assiduously to increase the fee-based component of advisor revenue. “Three years ago, we were 40% fee-based and 60% commission-based; today we’ve switched that [ratio]. We want to get to 80-85% fee-based.”
In addition to LPL’s broad resources, IFP offers its own research team (Hamm himself is one of the firm’s three CFAs), trading desk and money management for advisors.
Critically, it offers a dedicated transition team — “helping advisors move their books is a big concern for wirehouse advisors especially; that’s the scary part of moving,” Hamm says. Other elements that Hamm would have wanted as an advisor and included in the IFP value proposition are its study groups and the firm’s own national conference for networking.
In essence, IFP appeals to advisors wanting more of a boutique experience.
“They don’t want to feel like they’re one of 13,000 advisors,” is how Hamm describes the typical IFP advisor, all of whom independently own their own businesses, but who want the resources of a large firm along with the small-firm touch.
So, for example, networking within the smaller universe of IFP advisors can and does lead to substantial business growth, says Hamm, citing ongoing efforts to pair the firm’s approximately 180 retirement plan advisors with its 320 wealth managers (there’s some overlap).
“We try to marry the ones that make sense together. So now retirement plan people can join forces with wealth managers, who can now offer retirement plans. Hopefully this creates a 1+1=3 scenario,” Hamm quips.
For advisors not already doing financial planning, IFP is unrolling a turnkey system, now in beta testing.
“We’ll do a financial plan from A to Z; we’ll even gather the data from the client and input it into the system … That will give them the ability to bring in additional resources,” he says.
One more way Hamm thinks his firm’s capabilities can add value to advisors was recently demonstrated in the case of a new advisor, with IFP just three weeks, who had a prospect with a large windfall from the sale of a business.
The IFP CEO says it is not uncommon for such prospects to question whether a single advisor working alone can handle a large account.
“Our chief investment officer … built a customized portfolio for that prospective client that sold the case,” Hamm says.
“The advisor was able to lasso a $15 million account,” he says.
Check out 3 Steps to Moving Your Book to Fee-Based on ThinkAdvisor.