Quadruple Threat

Research: For those who don’t know NPH, how do you fit into the broker-dealer universe?

Dreffein: NPH is an independent contractor broker-dealer network. We have four broker-dealers: National Planning Corp., which is out of Santa Monica; SII Investments, which is out of Appleton, Wisc.; INVEST Financial Corp., out of Tampa; and Investment Centers of America, which is out of Bismark, N.D. We go after two primary markets in the four broker-dealers. The first is the independent contractor registered representative who’s focused primarily in the financial planning aspects of the business. We also have a significant presence in the bank channel, both in community and mid-size banks. We opened our doors as a network in 1998 when we formed NPC from scratch and also acquired SII. In 2000, we acquired INVEST and ICA.

Why run the four BDs as distinct brands?

It’s interesting; when we started the BD network, it was very apparent that there are three basic things any BD has to do to recruit and retain either representatives or banks. First, you have to provide innovative technology; second, you have to provide great service; and third, you also have to provide a competitive compensation package. You can distinguish a BD in these three areas, but the one thing that really distinguishes you and the final hurdle you have to clear is really the relationship aspect. When we look at registered representatives, their client’s relationship is with them, not with the BD. When we look at the reps, their relationship is with the BD. So we’ve kept them separate as kind of a counter-intuitive strategy. If people try to consolidate or roll up reps, what you end up doing is breaking that relationship.

Each of our firms has a very distinct culture, unique relationships and to some extent a distinct market niche, and we didn’t want to do anything to interfere with that.

Can you describe those unique cultures?

At NPC, our focus is on the independent contractor channel exclusively. We look at the seasoned producers that are really looking to partner with their BD to take the next step together. It’s a very collaborative culture at NPC. At SII, they have a very similar market niche; the difference there is you have more of the Midwestern culture — and I’m from the Midwest, so I mean that in the positive sense. ICA’s niche is very different. It focuses primarily on the community banks, which will create a brand-new program from scratch, taking a very hands-on approach to building a new segment of the market and generating new opportunities for folks who have yet to enter the securities business. And INVEST started as a third-party manager for mid-sized bank programs. They’ve done a great job with that because they understand the bank culture, and have also branched out. In fact, a lot of their growth has emerged from their unique niche with the independent contractors, recruiting those reps who would like to explore and partner with the bank side.

Are you looking to capture any other opportunities?

We’re in the markets where we want to be, which is where we see the greatest opportunity: seasoned independent contractor reps and the banks. Areas that could be potentially interesting to explore would be the CPA market and wirehouse reps.

What has the industry failed to realize about the banking channel?