Fantastic 5

NEXT Financial Group Inc. of Houston, Texas, has won broker/dealer of the year honors for the fifth year in a row, exceeded all of President Jeff Auld’s growth expectations, and continued to maintain a high level of customer support and service without, says Auld, compromising their values. Most of all, it has kept its reps happy, as shown by the sky-high rankings it received in this year’s B/D of the Year balloting.

NEXT Financial has in the last five years grown from a mere 100 or so active producing reps to nearly 675 total reps this year. In 2004 its revenues reached $38 million and in 2005 NEXT is on track to earn $50 million. “We are excited about the fact that we are growing,” Auld says. That growth, he continues, is even more rewarding because management’s commitment to its reps hasn’t wavered. “I see our biggest challenge as maintaining the best service to our reps in a firm growing so rapidly. It is getting more difficult to provide personal service for 600 reps than it was when we had 200. That is one of the reasons why winning this year is so exciting for me,” he says. “This is an indication that we are still doing what we should be doing.”

Though the overall number of NEXT reps continues to grow, a third of all reps still sustain ownership in the firm. “NEXT was created so reps could maintain control of their broker/dealer,” Auld continues. “That keeps me uniquely focused on their priorities.”

Todd Giere, president of Giere Investment Services in Brooklyn Park, Minnesota, joined NEXT when the company got started in 2000. “I switched because I liked the initial vision of the firm,” he recalls, and that hasn’t changed. “In today’s environment you need to have a company with strong ethics and the courage to do what’s right and not what’s profitable. I feel confident that the directors and senior staff have ethics in the highest regard and I trust their judgment.”

Proud of the fact that NEXT does not have any proprietary products or quarterly earnings requirements, Auld says he can focus 100% of his time toward running a profitable business that meets the needs of his representatives. He even answers to a board of directors who are all active producing reps. “In every decision I make, from procedures to products, the first thing I have to think about is how this will affect the reps,” Auld says.

After 15 years in the industry, Susan Bradley, registered office manager at Saline and Associates, LLC in Mt. Laurel, New Jersey, found her firm was tired of not having a voice with their larger broker/dealer. “I had no say,” she remembers. “The larger firms want to push the proprietary products, which may or may not be acceptable for clients.” For Bradley, the most frustrating part of her former B/D was when she called the back office for support, she was always dealing with a different person. “With NEXT, I’ve met probably 99% of its home office staff and everyone there is incredible,” she says. “We are a family. I have everyone’s phone number, I get returned calls immediately, and their compliance department is great.”

Those were just a few of the positives that made her transition to NEXT early this year “totally painless,” says Bradley. “NEXT has a transitions coordinator who walks you through everything. I think I speak with them on a daily basis,” she laughingly admits. “I would like to see them grow, especially if I am going to be a stockholder, but I don’t want to see them become a major powerhouse. NEXT has accountability, and the best thing about being a part owner is we get to decide how large the firm becomes.”

In 2004 Auld was committed to increasing his back-office staff and implementing a new imaging system. “We have made significant investments in new technology,” he says. NEXT has increased the server size in its office and installed a backup server. “With the new imaging system, reps can submit documents to us electronically, can input client information online, and slowly we are decreasing the amount of paper we produce. This is all to make it easier for our reps.”

In 2004 and for the remainder of 2005, Auld says he has focused his efforts on training his staff and recognizing the work of his representatives, and less on increasing the size of the firm. “Our new HR person is beginning to give customer service training to our back-office employees,” he explains. “It is something that we focus on and recognize.”

Each month, Auld gives out a “champion service” award for outstanding customer service as well as a “most valuable team” award to those who receive the greatest feedback from their peers.

Continuing to improve technology and begin working with financial institutions are NEXT’s objectives for 2006. But more importantly, Auld is focusing on improving NEXT as a whole. “I expect gross revenues to reach $70 million and total rep count will break 700 around the first of the year,” he says. “But we have recently become less focused on the number of reps and more focused on the amount of production we are adding.”–Megan F. Robert

DIVISION IV

FSC Securities

The benefits of size, with the freedom to act independently

During his 10 years as a rep at FSC Securities, Doug Loftus has watched the Atlanta-based broker/dealer get gobbled up by two large financial services firms, SunAmerica and then AIG. But that suits him just fine, he says, because now he benefits not only from the hands-on, family-like atmosphere at FSC, but is able to tap the scads of resources available through AIG. “We get the benefits of AIG’s size” while still being able to function as an independent business, says Loftus, an advisor with Spectrum Financial Advisors in Cincinnati. “AIG doesn’t get in our way.”

Throughout her more than 20 years as an FSC rep, Kim Ciccarelli Kantor admits that she’s “considered other options,” but has stayed with FSC because she’s “never found the same type of culture” at other broker/dealers. “FSC does a very good job of serving the independent advisor,” says Kantor, with Ciccarelli Advisory Services Inc. in Naples, Florida. In an industry that’s constantly changing, “FSC has done a good job of communicating” how those changes affect advisors, and helps advisors “determine how best to apply [those changes] to their practices and clients,” she says.

Like Kantor, Jim Herrington has stuck with FSC for more than two decades primarily because of FSC’s culture. “You’re treated like family,” he says. Herrington also enjoys the relationships he’s forged with FSC employees in the home office, and with his associates in the field. “Many of us have been [with FSC] for 15 or 20 years.” While Herrington is also impressed with the B/D’s ability to adapt to changes in the industry, he’s waiting for the day FSC provides group health coverage for its field force.

FSC President Joby Gruber boasts that the B/D “has been very successful” at retaining employees at the home office–the average employee has been there at least eight years–and in “creating strong relationships” with its field force. FSC’s loyal stable of reps has recognized the broker/dealer as Broker/Dealer of the Year eight times, including three out of the last four years.

In Gruber’s mind, the key to a successful relationship between a broker/dealer and its reps can be summed up in one word: Listening. “We pride ourselves on the fact that we do a very good job listening to what [reps'] issues are,” Gruber says. Gruber and other senior management get feedback from reps via a Yahoo! instant messaging service that allows reps to voice their questions and complaints, as well as through in-person visits to reps’ offices. “I spend a decent amount of my time on the road in producer offices, talking to reps and their staffs,” Gruber says. Since the staff members are involved in the day-to-day operations, Gruber likes to gauge how often the rep is in their hair. “If they’re in it too much, it means the producer is not out in front of the clients enough,” he says. Ideally, reps should spend 80% of their time with clients and 20% running the business, he says. If that’s not happening, “we ask how we can help get them there.”

Indeed, Loftus says he appreciates the fact that “FSC is always evaluating what they can do to make our businesses run more smoothly and productively.” The B/D does this by not only anticipating regulatory changes, he says, but by being “proactive” from a compliance standpoint. Kantor agrees. “Compliance is one of the most difficult areas to keep your hands on, and it’s hard to find clarity,” she says. “FSC tries its very best to find clarity and be able to offer it in a way that the advisor understands what needs to be done–how to take the next step.”

To help its 1,700 reps save money, FSC can leverage AIG’s resources and provide them with discounts at various stores. For instance, AIG negotiated a deal with CareerBuilder, an online employment service, in which reps are charged only $60 to place an ad. The normal rate is $360 for one ad, says Loftus, noting that he recently hired two new staff members who responded to an ad he placed on CareerBuilder.

To maintain its competitive edge, and keep its reps happy, Gruber says FSC plans to remain “an entrepreneurial firm in a corporate wrapper.” FSC is now “pushing for AIG to help us in the creative side of product placement” so that by the end of this year or beginning of 2006, FSC can provide reps with products to serve the high-net-worth arena, he says. The typical rep client has about $2 million in net worth, he says, “so we’re going to try and provide products to help them attract $5 million and $8 million clients.”–Melanie Waddell

Special Award

Commonwealth Financial Network

Helping its reps to define–and deliver–true wealth management

The broker/dealer of the year balloting is meant to gauge reps’ assessment of their own B/D, but we do ask voters to share with us which other broker/dealer they’d consider affiliating with, and Commonwealth Financial Network has consistently ranked high in that tally. While some would chose Commonwealth because, they say, of its good technology and reputation for attracting, then keeping happy, good representatives, one rep (from one of the other winning broker/dealers, by chance) succinctly put forth his reasons. He’d pick Commonwealth, he wrote, because of its “high integrity, high touch, and reputation.”

More to the point, there’s another constituency where Commonwealth scores high, and that’s with its own reps. This year, Investment Advisor declared a fifth Broker/Dealer of the Year to reflect the sterling ratings its reps gave Commonwealth, and the fact that Commonwealth found itself on the cusp between Divisions III and IV regarding its number of producing reps when the balloting took place this year (see the “Why Five?” sidebar on page 80). Commonwealth’s reputation for repcentricity is certainly evident in its approach to technology. Darren Tedesco, who helps run the broker/dealer’s technology platform, points out that by design the firm doesn’t mandate the use of specific financial planning applications, for instance–the platform will accommodate just about every piece of advisor-run software out there. Or maybe the approach starts at the top. If you ask CEO Joe Deitch to share the key to Commonwealth’s success, he says that “Commonwealth’s business plan, ultimately, is to attract and retain successful advisors–to help them grow.” It can do so by building and maintaining a system, he says, that allows advisors to “maximize their time and talent, which takes things off their desks and their staff’s desks, and to help educate the staff.”

One critical element in that system is the Commonwealth Wealth Management team. This interdisciplinary group that lives at the B/D’s Waltham, Massachusetts, headquarters is the one point of contact available to all Commonwealth reps, providing direct advice in specific areas from the team and other internal Commonwealth sources, access to a comprehensive database of information on the Web presented in a “molecular map” form displaying the myriad areas that affect each other in planning, and entree to other Commonwealth advisors and outside experts from the broker/dealer’s strategic partners.

Tere D’Amato, a CFP, CLU, and ChFC who is director of advanced planning, wealth management, at Commonwealth, said a Commonwealth rep told her that before the establishment of the team, he could call the home office with a thorny problem, but if he called “someone in the retirement department, I’d get a retirement solution. If I called someone in the investment department, I’d get an investment solution.” The team presents a comprehensive, multidisciplinary review of a problem, D’Amato says, with “more of a financial planning point of view.” So reps “get a balanced point of view that can touch on all the different aspects [of a particular plan or problem]–that’s why we call it our molecular map,” referring to a graphic representation of all the facets of financial planning resembling a molecule’s structure.

One Commonwealth rep who has used the map to help him find his way is Christopher Fraga, an attorney and CFP with separate but complementary practices in Massachusetts and Florida who has been affiliated with the broker/dealer since 1989. He’s used the team, he says, to help him sharpen his marketing focus, since by using it with clients he’s “able to present this holistic approach” to planning. “What they’ve done is tied together all the pieces that relate to somebody’s financial life,” he says. “From my own experience,” he adds, “the one thing I hear consistently from clients is that they like the fact that it’s a comprehensive approach.”

The platform can also “allow an advisor to target higher-net-worth clients,” Fraga says, “since it gives them the confidence to have backup, to have support, even though they may not have individual expertise in all the subject matters” involved in comprehensive financial planning.

Deitch has a refreshing approach to the concept of wealth management. “The term started to gain traction a few years back,” Deitch says, ” but it’s amusing, because wealth management is nothing more than financial planning.” But financial planning done properly “ has always been an enormously labor-intensive process,” Deitch points out. “What technology allows you to do now is to integrate the various aspects of a plan and make it available to your client. It speeds things up and integrates the whole process.”

While Deitch believes the heyday of investment management has waned–”Not only have fees and commissions come down, but it’s very simple for the investor to leave one advisor and go to another”–he argues that in the wealth management model that’s not the case, since “anyone who has any money needs to maximize it, and to coordinate things as much as possible.” For those folks, “to have a trusted advisor is just wonderful.”

Commonwealth doesn’t charge for the wealth management service to its reps, and when asked if it constitutes a long-term investment for the broker/dealer, Deitch replies: “Our specific market niche is to be the high-end provider for the high-end advisor. To claim and retain our standing in the industry, we need to constantly raise the bar and get better. So, yes, it’s an investment in the future, it’s one of a hundred investments, and next year we’ll make a hundred more. There’s no end to it. That’s good; we like it that way.” Apparently, so do Commonwealth’s reps.–James J. Green