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Commonwealth Aims for Controlled Growth

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(Phoenix) Commonwealth Financial Network wants to maintain its identity despite some serious expansion, say executives attending the broker-dealer’s recent national conference, held Oct. 26-30 at the JW Marriott Desert Resort & Spa. And, as far as the independent BDs reps are concerned, that plan is just fine.

“We are focused on controlled, managed growth,” says Joe Deitch, chairman and CEO. “It’s more about quality than quantity.” He also told advisors that the company isn’t in any talks about a possible sale of the business nor is it making any plans to go public.

“It feels that the Commonwealth staff members are genuinely concerned about you and your experience with them, not the bottom line,” says Matt Slewa of KSP Financial Consultants in Waltham, Mass.

Still, some of Commonwealth’s numbers are going up, making it likely that a possible suitor or two could came calling: for instance, the average production of a Commonwealth advisor is now $300,000, and the average AUM is $40 million.

“This is a big change from 1990, when we had one advisor with production of $300,000 or more,” notes Deitch. Today, 33 advisors are producing $1 million or more, he adds.

Furthermore, the Waltham, Mass., and San Diego-based BD has raised its minimum production level for new advisors to $200,000. “While we’re being more selective and therefore fishing in a smaller pond, our profile in the industry continues to increase and that puts us on more folks’ radar,” explains John Rooney, managing principal in San Diego.

But, like other firms, Commonwealth wants to make sure it gets the right fit. “About 55 percent of prospective advisors are turned down,” Deitch explains. “That’s up from 35 percent two years ago.” Of those getting a thumbs-up, some 75 percent visit and join.

In addition, Commonwealth’s revenue is on track to grow about 20 percent this year and reach about $400 million; fee-based sales could total $13 million vs. $9 million a year ago. And assets should tick up to some $40 billion from roughly $30 billion in 2005.

As for the total number of advisors affiliated with Commonwealth, that stands at about 1,080 — up about 100 from a year ago. With some 400 employees, that gives the broker-dealer a staff-to-advisor ratio of about one to three. “That compares quite favorably with that of rivals, where one to five or one to six and higher is the norm.”

Addressing a crowd of 600-plus advisors and 540 other guests, Deitch and Commonwealth President Peter Wheeler took turns answering questions about the firm’s direction. The questions had been sent in by advisors via e-mail in advance.

Though Deitch and Wheeler weren’t thrilled with each and every one of the questions coming their way, they did say that the question-and-answer session is part of Commonwealth’s overall approach to “community building.” They also reminded advisors to keep the conversation going via the company’s online advisor network, where there’s an ongoing request for feedback and suggestions from advisors. These comments and questions are generally shared with the appropriate staff person within an hour, Deitch says.

As for improvements in payouts and fees, which some rivals have been highlighting in ads, Wheeler says to check the “small print.” For its part, Commonwealth expects to make announcements about positive changes to its own fees and/or payout schedules by year-end, according to Rooney.

These issues, though important to advisors, weren’t the main thing on their minds during Commonwealth’s five-day event. For Slewa, who traveled to Arizona with his family, the conference was a great way to gather information on alternative investments

And, Slewa says, even though he’s just three miles from the broker-dealer’s East Coast offices, the conference gave him a chance to “really get out and see the whole [Commonwealth] landscape.”

Slewa and the team he’s part of came over from Ameriprise in January. “We appreciate the attitude of the Commonwealth staff, and that permeates the advisors: It’s open architecture, friendly and welcoming.”

For 12-year veteran Joshua Paul of Bartholomew & Company in Worcester, Mass., “The conference is a good opportunity for me to see what other advisors are doing,” he shares.

Paul participates in a study group of younger advisors who discuss practice-management topics once a quarter and share thoughts on what it takes to become a $1 million-plus producer. He says he was glad to pick up additional tips in Phoenix, try out some jalapeno vanilla ice cream and attend the special talks and performances.

The Commonwealth event included “An Extravaganza of the Elements” show, which featured acrobats, as well as separate performances by comic jugglers Jon Wee and Owen Morse and a motivational speech by photographer Dewitt Jones.

Sidney Franks of the Highbridge Financial Group in Tarrytown, N.Y., says his focus during the event was generally on business. “The sessions were jam-packed with information from 9 to 5 every day,” he explains. “I didn’t see much of the non-classroom facilities, like the pool.”

Franks did get the chance to interact with Commonwealth staff and wholesalers. “There’s a strong team dynamic, and the culture reinforces it,” he says. “They’ve done a good job at keeping the culture the way it’s been [historically] and are getting people to come in who are successful in the business… I met many new advisors and good people.”


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