As we confirm our lunch appointment, Ted Charles comments on the famous selection of wine at 21 Club. We commiserate with one another that we can’t really have a glass of wine during work hours. 21 Club, one of New York’s best and most venerable restaurants, may be the fanciest yet where Research has interviewed a guest, but then again, Charles has gone to the trouble of flying in from the Boston area, where Investors Capital is headquartered. Besides, with this interview, the “Lunch with Research” column marks its first anniversary.
Who: Theodore E. Charles, President, Chairman, and CEO, Investors Capital
Where: 21 Club, 21 W 52nd Street, New York
On the Menu: Cold Senegalese soup with grilled chicken, Granny Smith apples and Ritz-Carlton service.
Investors Capital may be an older institution, but not by a very wide margin. Charles founded the independent broker-dealer with $1.4 million of his own money in 1992.
What compelled him to take the risk?
“I wanted to give registered reps an opportunity to earn a fee based on their assets under management, not a commission.”
In his own career selling insurance, annuities and other financial products, Charles had approached his managers with the idea of a fee-based practice, but it was promptly shot down. So he went out and found a better way. His experience, not just as a salesman in the field but in the regulatory area and in recruiting and managing a sales staff, has been an invaluable resource in the firm’s growth.
Not that it has grown into a giant, even though the time of the firm’s founding was auspicious (at the dawn of a long-running bull market in equities and runaway growth in financial advisory services).
In fact, the company has been getting smaller — by design. The number of independent financial advisors it serves slimmed by 16 percent during 2006, from around 800 to 675 currently.
“We hired consultants and did a number of studies to review our business,” says Charles. “We pretty much reinvented it, basically by cutting the bottom 10 [percent] of the rep base.”
They culled those who did not want to expand their businesses or whose business model or production didn’t quite fit with Investors Capital’s long-term strategic plans. That was, in a way, Phase Two of the firm’s development. In the beginning, Charles admits, Investors Capital took pretty much everyone who wanted to join the firm.
The remaining stable of reps is much more productive, asserts Charles. Gross revenues increased 43 percent last year, with an even faster growth on a per capita basis. Average payout per rep jumped 70 percent. According to Financial Planning magazine, it ranked No. 1 in the industry in terms of payout growth.
The remaining reps, Charles says, expect sterling service from the home office. The broker-dealer has gone out of its way to provide it. The rep-to-staff ratio was nearly halved last year, from 11.4 to 6.8, not only because the number of reps decreased but because the home office staff was beefed up to nearly 100.
It may sound a bit grandiose, but Charles wants to see Investors Capital as a Ritz-Carlton of broker-dealers, after the world famous hotel chain. The back-office staff, in fact, has gone through Ritz-Carlton training, to learn courtesy and efficiency and achieve overall improvements in all aspects of service they provide to reps.