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Financial Planning > Behavioral Finance

THE PLAYING FIELD- Partners in Growth

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It almost goes without saying. All independent advisors want their businesses to grow and outshine their competitors. How advisors achieve this common goal, however, varies. If you’re like Richard Mack, principal of Mack Financial Group in Indianapolis, Indiana, the best way to ensure that your firm continues to thrive is to join a consortium of likeminded entrepreneurs with whom you can network and share strategic ideas–someplace like M Financial Group.

When Mack became a member of Portland, Oregon-based M Financial 11 years ago, he was wondering whether to sell his firm or find more sophisticated methods to push his business forward. “Like most firms, you reach a certain point in your business where you outgrow traditional resources to help [your business] grow,” Mack says. “The choices [of alternative resources for growth] are limited,” and sometimes firms are forced to “sell out for some ridiculously low price.”

Like some other independent-minded advisors, Mack chose to link up with M Financial instead of selling out to a firm like National Financial Partners. The member firms of M Financial–independent insurance, investment, and executive benefits firms–are shareholders. But not all advisors qualify to be M members. Mack’s firm is a perfect candidate because his clients are among the nation’s ultra-wealthy, having a net worth of $10 million and up.

That’s the kind of firm M Financial is looking for, says president and CEO Fred Jonske. Of the 110 member firms at M, 90% of them serve wealthy clients with net worths in excess of $20 million, he says. The other 10% serve corporate benefits firms and Fortune 1000 companies. Jonske says firms must meet pretty strict requirements before they can join M. Firms must already be successful, he says, and be generating “in excess of $1 million in revenue” annually.

Firms must also “fit the image of what [M Financial] stands for,” which is high integrity and ethics, he says. “We’re looking for leaders” who will participate in the direction of the organization.

Dues for the first two years of membership are $25,000, with $10,000 of that going toward purchasing 10,000 shares of M Financial stock. During the first two years, firms are considered “provisional members” and are required to meet a production quota before they are considered full-fledged members, Jonske says. Firms are judged on either insurance production or assets under management. With insurance, firms must produce “$600,000 of commissionable premiums” in life insurance, he says; M Financial uses a “similar formula on the assets under management side.”

Mark Tibergien, partner-in-charge of the Securities & Insurance Niche for Moss Adams LLP in Seattle, and an Investment Advisor columnist, says firms like M Financial provide an “excellent way” for firms to learn from each other.

Planner Mack says he loves collaborating with his fellow members on different ways to beef up his practice. He gets the best pointers on areas such as administrative tasks and practice management–and not just from other members, but from M Financial’s staff of accountants, actuaries, and lawyers at the firm’s Portland headquarters. Jonske says members can brainstorm at a number of meetings that M Financial sponsors throughout the year. “If you ask member firms who their best friends are, they’d probably tell you it’s someone else within M,” Jonske says. “We have a tight-knit culture where people reach out to each other.”

First Insurance, Then Investments

M Financial ( got its start back in 1978 when some leading players in the life insurance business decided to create an umbrella organization that could customize products for their ultra-rich clients. But nowadays, M Financial is a big distributor of investment products as well. “For the first two decades of our history, [M Financial] was focused on life insurance production,” Jonske says. But within the last 10 years, 50% of M’s member firms have migrated to the investment business, he says, “and more than 25 of our firms each have more than $100 million in assets that they manage.” M Financial is now being “approached by firms that are exclusively investment oriented.”

Mack’s firm is among those member firms that are aggressively growing their fee-based business. About 70% of Mack’s revenue is generated from insurance, while the other 30% comes from investments. But three quarters of his insurance business “is investment-related,” he says, and includes products like private placement life insurance and variable life.

To accommodate members’ evolving needs as well as those of new members, M Financial launched its own broker/dealer, M Holding Securities, four years ago. In fact, M’s broker/dealer is the 14th largest independent broker/dealer in the country, says Randy O’Connor, M Financial’s CFO. M Holding offers a variety of solutions to fit advisors’ specific needs through its wealth management platform called M Wealth. Member firms can access products from Bank of New York, Charles Schwab, and soon, Bear Stearns. M Holdings is “in discussions with other [custodial] providers,” and has selling agreements with tons of mutual fund firms, O’Connor says.

One of the reasons M Financial “has become so successful,” O’Connor says, “is because we don’t mandate” that members use the firm’s B/D. But 80% of the firms have already switched their business to M’s B/D, O’Connor says. M Financial is an “open architecture organization,” he says, meaning that the firm understands that “one solution doesn’t fit all advisors.” Besides offering bundled services from Schwab and Bank of New York, M Financial also provides unbundled investment services from a number of mutual fund providers because “advisors have to have best-in-class” products, O’Connor says.

Sometime this month, M Holding plans to launch a “proposal system” through its relationship with Advisor Software (ASI), which will allow member firms to “strike a deal with any custodian that they want.” Members already have custodial arrangements with Schwab, Pershing, Fidelity, and some banks, he says.

Jonske is quick to point out that M Financial’s business model is very different from that of National Financial Partners, or NFP, which is based in New York. “We’re not interested in growth for growth’s sake,” he says. “Our primary mission is to grow our existing member firms; we do think bringing on new members is a healthy thing for us, but [our goal] is not to grow firms at all costs.” NFP purchases a firm “and the ownership resides with [NFP], the corporation,” he says. “Although NFP indicates there are management contracts and that the manager [of each firm] is in control,” M Financial is different because each firm remains “independently owned and operated and doesn’t relinquish ownership.”

But the big challenge for M Financial, says Tibergien of Moss Adams, is how to replenish its member base as the firms’ owners reach retirement. The “risk is that [M Financial's] firms could be acquired by the likes of NFP, which would force the M group to find other [members] in order to keep its organization intact,” Tibergien says. “This is where the succession issue comes in–eventually all of M’s members will need to confront the challenge of how they will transition their businesses, and to whom.”

Jonske says he’s well aware that “firms can leave [M Financial] at any time,” so that’s why M has to “adhere to very high standards to attract firms to us.” But Jonske isn’t worried about a mass exodus. “We have such low attrition rates,” he says, which means “our value proposition to them is extraordinary.” And the thought of having to measure up to new competitors doesn’t bother Jonske, either. NFP has actually swallowed up most of the smaller firms that have tried to mimic M Financial’s business model, he says.

If you’re at a critical juncture in your business, and are debating whether to sell your firm or find more innovative ways to boost your bottom line–and your clients are super rich–it probably pays to take a look at a firm like M Financial.

Washington Bureau Chief Melanie Waddell can be reached at


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