Broker/dealer representatives are honest when it comes to evaluating their own broker/dealers, but when given anonymity, as they have been in Investment Advisor’s annual Broker/Dealer of the Year balloting for the past 15 years, they can be brutally so. Take the question we ask on the B/D ballot regarding “Which other services does your broker/dealer not currently offer that you wish it did?” The answers range from the predictable–”better marketing support”–and the heartfelt–”health insurance for reps”–to the intriguing–”providing loans for practice acquisitions”–and the wistful–”user-friendly software.” Then ask them, as we do, what other broker/dealers they would consider an affiliation with. The answers can be illuminating (see “Were the Grass Greener” sidebar on page 74) and even amusing, as one voter familiar with the New Jersey political scene quipped: “Goldman Sachs–They make you very rich so you can run for the Senate.”
Make no mistake about it. The B/D of the Year is an important competition for many independent broker/dealers that use wins as the basis for marketing and recruitment campaigns, and losses to denigrate their opponents. This year, we realized that we could have done a better job at, of all things, communicating with our readers. We realized that our attempt to insure voters’ anonymity and protect the integrity of the voting process might cause confusion and unintended consequences, so we will be disclosing more about that process and have named a fifth winner this year in a return of sorts to the earliest years of the contest, when we routinely named five winners annually.
In this anniversary year for Investment Advisor, we’ve become more aware of how the tides of time reveal recurring issues that must be overcome by advisors, and how important it is to advisors’ success to team up with partners who can not only help them provide the necessary services to keep current clients happy but also extend their reach to attract the best kind of clients in the future. That’s where a good broker/dealer can make all the difference in the world. And who better to let you know which B/Ds are best than your peers, who like you can and do vote with their feet and assets when a broker/dealer fails to meet those high partnership standards?
The good news is that the balloting reveals that the overwhelming majority of reps are quite happy, thank you very much, with their current affiliations. The better news is that the profiles of this year’s winning Broker/Dealers of the Year–the Fantastic 5–reveal some of the machinery behind the success, which more often than not translates into competent, consistent management and home office staff that provides the service, technology, marketing, and compliance support that reps need to gain and sustain success.–James J. Green
Geneos Wealth Management
In the space of only three years of existence, two wins
Once again, the Division I Broker/Dealer of the year is Geneos Wealth Management. In only its third year of operation, why do representatives like Geneos so much? As they told us again and again in their votes and interviews, the reps said that despite the B/D’s relative youth, Geneos has very experienced, extremely professional management. They focus on compliance, offer a broad range of high-quality products, and are just plain fun to work with. Although the firm was founded only in 2002, Russell Diachok, president and CEO of Geneos, is no broker/dealer tenderfoot. He and his father, George Diachok, chairman of Geneos, started and for 20 years managed another successful broker/dealer, Multi-Financial, and sold it to ING Group in 1998.
“There’s a very high level of professionalism,” says Paul French, an advisor at Plott & French Financial Advisors in Radford, Virginia, who affiliated with Geneos in April. “When you call the home office in Denver, you get to speak to somebody–usually right away–and they know what they’re talking about.” That was not the case at his prior B/D where he’d had to wade through an automated phone system, only to get outsourced to a call center–in another country–before he could get what little help it offered. French says he now has “many, many more choices” of products, for clients who “these days leave our office with enormous grins because we have so much more to offer.” He did have one regret regarding the move to Geneos: “I wish I had done it sooner.”
The praise is reciprocated by Geneos management. “We are very grateful to be working with some very high-quality financial advisors. We consider it a true partnership, and here in the home office we want to support their efforts in any way we can,” says Russ Diachok, who gives credit for Geneos’s win to a great home office staff who “try to make it easy to do business.” High payouts don’t hurt either: Geneos’s payouts are among the highest in the industry, at about 97% on advisory business, and 94% on standard business. “If you’re going to attract good people you have to be competitive with payouts,” Diachok says.
But running an award-winning firm is not without its challenges, and for Russ Diachok the most serious is the compliance environment, which he calls “unlike anything I’ve seen in 25 years in business.” The regulatory environment is something that Geneos-affiliated representatives take seriously as well. Betsy and Craig Isaacs are a husband-and-wife team at La Jolla Wealth Management, with offices in Phoenix and San Diego, who have worked together on and off since they were married about 28 years ago. Betsy Isaacs is a registered representative and office manager; Craig Isaacs is the OSJ. One of the things they like best about Geneos is the firm’s attention to compliance. “The compliance issues just keep getting more difficult–there’s more and more paperwork and I know that they are very, very diligent and they take it very seriously,” says Betsy Isaacs.
“We both started out as life agents many, many years ago. If you go back a long way, the insurance companies used to have a family atmosphere. You could talk with the underwriters, and you were always at conventions where you got to meet everybody–all the people that helped you get your business through. The insurance industry has changed tremendously, and I think a lot of broker/dealers have also because they’re so huge, but with Geneos–it doesn’t matter how big they get, they truly care about the people that are with them. They always ask for your input–’is there anything we can do differently?’ They have conference calls with their OSJs on a weekly basis, so things just don’t get to the point where people get agitated or irritated. You call, and you don’t get voicemail or if you do, they call you right back. It’s like a family business,” says Betsy Isaacs, where “they just do a lot of things right.”
Craig Isaacs was with Multi-Financial before the Diachoks sold that firm, and moved to Geneos when they started up. He said that Geneos will “go the extra mile to personalize all the issues that people are dealing with,” and have a “How can we get this done?” attitude. Geneos has expanded its offerings to include “private placement limited partnerships. They brought on EverBank [Financial Corp, based in Jacksonville, Florida] as a relationship, which is an Internet banking capability,” according to Craig Isaacs. He would like to see insurance “life settlements” added to the product mix, but there is not much else on his wish list.
In a business with a bottom-line orientation, what’s the bottom line for Geneos? According to Betsy Isaacs, “they’re just a lot of fun, they’re great people to work with, and they’re all smart.” –Kathleen M. McBride
Brecek & Young Advisors
Modern technology but with a time-tested attitude
Adherence to the golden rule is probably the most underrated component in the success of any business. Those who fail to treat their customers the way they would like to be treated often find themselves with no customers at all. “I’ve found that one of the most important things we can do as a firm is to have very strict service standards,” says Roland Brecek, president and CEO of Brecek & Young Advisors, Inc. B&Y, headquartered in Folsom, California, returns to the winner’s circle as Broker/Dealer of the Year in Division II; the firm had a three-year run as winner of the same division from 1999 through 2001.”It’s very important for our staff to understand who our customer is, and our customers are our representatives. It’s up to us to make sure the customers are getting the kind of service that they expect so that they can be successful.”
Based on the marks the firm received in this year’s poll, the firm’s representatives must indeed be successful. More than 50% of Brecek & Young’s reps rated the firm as best in all 14 categories, and another 15% rated it tops in all but one or two areas.
Although he says that he doesn’t try to follow what other broker/dealers are doing, Brecek thinks that his success in recruiting high-producing reps away from other firms is partially attributable to his emphasis on high service standards and a wide range of sales support. For every eight representatives there is a full-time staffer at the company’s headquarters, and for every 50 representatives there’s a Series 24 licensed sales manager, plus an internal sales manager to back up those managers. “Those managers have been in the field, they’ve sold before, and if a representative knows what to sell and wants to be left alone, we’ll do that,” says Brecek, returning to his give-the-customer-what-she-wants theme. He quickly adds, however, that “if the representative is looking for somebody to help them with illustrations or is looking for product suggestions or service suggestions, then I’ve got somebody here that they know they can count on.”
Another area where Brecek & Young tries to stand apart from other broker/dealers is in the amount of time and effort put into developing fee-based expertise. Representatives are free to choose their own business model, whether it’s commission-based, fee-based, or a combination of the two. “What I’ve been trying to teach our representatives is that when they’re working with a customer, they need to understand what the customer’s looking for,” Brecek says. “Some customers would prefer to pay a commission and we’ve got that outlet, while other customers would prefer to trade more frequently and not pay ticket charges. Some customers would prefer to have an active investment manager and investment advisor that’s making their investment decisions for them, and the representative has that outlet as well.” There’s another benefit to taking this approach, he says: customer retention. “I think that if you’re working with customers and you’re able to diagnose their needs, then provide them with what they want, you’re more likely to retain those customers.”
One of the biggest issues facing all financial services firms these days is the increased burden of compliance. Brecek says that while he has had to beef up his staffing in this area and make a substantial investment in new technology, he’s countered that by attracting higher-producing reps. “The normal representative that joins our firm is doing in excess of $100,000 in commissions, whereas in the past we were accepting representatives that were producing less than that,” he says. “It’s turning out to be a profitable model for us.”
As the firm continues to grow and meet its compliance obligations, Brecek feels that technology will allow him to change the rep-to-home-office-staff ratio from 1:8 to 1:10 or even 1:12. Using Web-based systems, the firm’s reps have access to programs that can help fill out the myriad forms required for new accounts and others to help consolidate their statements, as well as programs for research and compliance. “We’ve got financial planning programs that coordinate with those particular programs so that the representatives don’t have to re-input the information,” he says.
Brecek & Young was founded in 1992 as an RIA and in 1996 added the broker/dealer component. Although the two concepts initially operated separately, a merger two years ago brought everything together. (The Young in the firm’s name belongs to Hal Young, who serves as VP of strategic investments and spends much of his time visiting representatives to provide sales support.)
“Our goal is not to be the biggest firm in the world,” Brecek explains. “Our goal is to grow at a reasonable rate, because we want to keep a family feel with the representatives.”
Currently the firm is adding approximately 10 new representatives a month while simultaneously weeding out some of its lower-producing representatives. “We’re basically growing at a net five representatives a month, and our five-year strategic plan is to keep up that level of growth.”
If Brecek & Young continues growing at that pace, the firm should more than double in size over the next five years, moving it into Division III (reserved for those firms with between 500 and 999 reps) in either 2008 or 2009, but the prospect fazes Brecek not in the least. “We’ve got the infrastructure in place to support that and I’ve got the office space as well,” he says. By providing the right combination of cutting-edge technology and a culture built on good customer service, it’s likely that Brecek & Young will continue to be showered with accolades by its reps in the years to come.–Robert F. Keane
NEXT Financial Group
Professionally run but treated personally in a fast-growing firm
When Thomas Schmidt opted to leave his large broker/dealer, he knew he needed a new B/D that provided the same back-office support larger broker/dealers offer, but he wanted the freedom to manage his business as he saw fit. Running Heritage Financial Group, a one-man operation in Houston, Schmidt felt NEXT Financial Group Inc. offered exactly what he was looking for.
“The organization is run very professionally and personally,” Schmidt says. “I have a small shop and I am not one of their superstars, but I don’t feel as if I am treated any different. I get all the same support and opportunities as if I were a top producer and that is important to me.”
Having been with NEXT now for more than three years, Schmidt says, nothing has changed. “It’s important to look at the history of the business,” he continues. “Even though NEXT has grown, they haven’t forgotten what got them started in the first place,” he says. “Their concern and efforts to support [their reps] remain priorities, and they have never sacrificed their standards to achieve larger success.”