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January 01, 2006 at 02:00 AM
In your search to find business approaches that can make your practice stand out, you may have found that real value is more elusive than ever as our industry becomes increasingly commoditized.
There are exceptions to every rule, however, and while our recruiting firm places advisors with over 50 broker/dealers nationwide, some of the real jewels we contract with are a dozen or so producer groups.
What are producer groups, you ask?
Simply put, producer groups are like-minded advisors doing business through carefully selected independent broker/dealers. Though producer groups grew out of several different models, the two most common types are:
Office of Supervisory Jurisdiction (OSJ) groups, in which the principals of several advisory firms band together under the premise they’ll have greater leverage with their B/D together than on their own.
Core groups that grow organically through the advisors’ own efforts such as referrals, networking through wholesalers, mailing campaigns, or by using recruiting firms like mine.
As might be expected, a common problem with OSJ-type producer groups is the clash of egos over issues such as who will head the group, and whether other group members will feel slighted having less authority. Other issues involve various OSJ-producer group members having dissimilar business models, marketing approaches, production per rep, and service needs. Significant differences in those areas can create tension in a producer group.
At the same time, producer groups that grow organically usually do so through a particular marketing niche in which they excel. As they grow, most organic producer groups will also expand geographically, which further accelerates their growth curves. Last year, for example, I helped add fifteen reps to one such producer group, and saw their production grow from $6.5 million to over $11 million.
A common misconception about producer groups is that they are merely intermediaries taking a cut of a rep’s payouts, but offering little if anything in return. I’ve learned from years of first-hand experience that there is usually much more to producer groups than that.
The obvious benefits of being part of a producer group are getting together with the other members at various times of the year and doing some serious networking. For instance, most producer groups hold a series of conferences and regional meetings for their members each year to provide networking opportunities as well as educational sessions featuring assorted vendors introducing new products and investment ideas. While those meetings are valuable to members, there are much greater benefits.
For one thing, producer groups are quite beneficial to your bottom line. After all, a producer group with an active membership and several million dollars in gross dealer concessions is in a position to leverage above-average payouts from broker/dealers. Typically, advisors in producer groups get the same or better payouts than if they’d joined the B/D on their own. For example, if you contracted with a broker/dealer as an individual advisor, you’d probably get the B/D’s standard payout grid of 85%. But if you contracted with that same B/D through a producer group, you might be looking at a 90% payout grid.
