When independent broker/dealer reps consider joining a new B/D these days, they tell Jonathan Henschen that they “want a firm that will leave me alone–that will stop restricting my world.” This Marlene Dietrich approach reflects the underlying dilemma of independent broker/dealers and their reps–interdependence versus independence–and is one of the main dynamics in play when it comes to recruiting reps, which happens to be the business that Henschen & Associates, based in Marine on St. Croix, Minnesota, is in.
Greg Sauer of The Primary Group is in that same business. Speaking on a panel addressing the state of recruiting at the Fidelity Executive Forum in Scottsdale, Arizona, in April, Sauer said he had detected some major shifts in rep portability over the past five years. “Pre 9/11,” he said, referring to the reasons reps would change B/Ds, “it was all about the money.” Post-9/11, everyone stayed put, but now, Sauer sees more rep movement due to the perception that service might be better on the other side of the fence. Moreover, “human factors” are more important to reps these days, he argues, and maintaining a good quality of life is a key factor in their business decisions.
Another speaker on the Fidelity panel–Mark Mettelman, president and CEO of the broker/dealer Triad Advisors, which can count about 275 reps–argued that reps’ current reason for changing B/Ds is “rarely payout; more often it’s a change” in management or ownership that produces some kind of “cultural” change at the B/D.
Executives from a number of broker/dealers interviewed for this article suggested that the days when the big producer got red-carpet treatment at every B/D are over, killed off by the increased burden of compliance and the fear of big fines. “Places where one or two hits on your record were okay aren’t anymore,” says Henschen, and forget about changing B/Ds if you have an unresolved arbitration pending. Henschen believes that some B/Ds are overreacting on compliance, prompting some to depart for firms that are perceived to be more welcoming of reps who do a lot of equity indexed annuity business, for instance, or variable annuities.
George Keith, the panel moderator who is a National Financial executive VP and former recruiter at Paine Webber, quoted Cerulli Associates research showing that it’s service that drives rep satisfaction: “What makes them leave is that they don’t get serviced well by the people around them,” says Keith, “they don’t get answers to their questions; people don’t pick up their phones.” The second driver of rep satisfaction is payout, he said, and third is whether their B/D has the technology to support their business.
So how do you get the best reps to join your firm? Janice Hart of Commonwealth, another panelist, says B/Ds should “use your existing community to get the word out,” and that there’s no one better situated to help convince a rep to make a switch than a rep who recently moved over herself. Finally, Hart says recruiters have “got to address the fear of transition,” of having to move all those accounts.
Mettelman says his firm permits reps to have their own RIAs, but Henschen knows of B/Ds that pay a premium to reps with their own RIAs; he also knows of firms that actively discourage, or disallow, reps having their own RIAs (for a listing of RIA-friendly B/Ds, click here).
Perhaps the most unique approach to recruiting comes from Raymond James Financial Services, which gives a video iPod to reps who have visited the firm’s headquarters or attended national conferences. Loaded onto the iPod are video and audio presentations about the firm.