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Practice Management > Building Your Business

IA Interview: Changing of the Guard, Sort Of

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At the recent Financial Services Institute conference in San Antonio in January, an experienced executive from a Massachusetts-based broker/dealer suggested that the CEO of his firm had “Commonwealth envy.” He was referring to Commonwealth Financial Network, the 1,200-rep independent broker/dealer based in Waltham, Massachusetts, and San Diego. Specifically, though, this Commonwealth competitor was referring to the penchant among Commonwealth employees to completely embrace the corporate culture at Commonwealth that is, by all accounts, the doing of co-founders Joe Deitch and Peter Wheeler, the B/D’s current chairman and president, respectively. Until very recently, Deitch was also the CEO of privately held Commonwealth, but in February 2009, he ceded that job to Wayne Bloom, the long-time Commonwealth partner who most recently was running the firm’s wealth management initiative. Bloom says his new role is part of a long-envisioned and carefully thought-out succession plan–”Joe and I have been talking about this for years,” he told me–but even such a planned succession can be instructive to both Commonwealth and its competitors. Editorial Director Jamie Green spoke in person and by telephone with Bloom in late January about his priorities and what the change at the top means, and doesn’t.

With your new appointment, how are the responsibilities being divvied up–how are they changing–at Commonwealth?

Commonwealth is a firm run by its 11 partners [Bloom is one of the 11.-Ed.] and it will stay that way. The partners meet every Thursday, usually for at least three or four hours. I’ve always been involved in wealth management, and will continue to do so. Peter [Wheeler, president of Commonwealth] looks after human resources and compliance; Joe [Deitch, chairman] is mostly concerned with marketing and recruiting, though I will be doing more marketing. Commonwealth has always been about the team. My role will be to keep the team well knit. We’ve internally branded this as ‘weaving,’ a process which allows us to bring together members of the team, to [take us out of] our silos.

Joe sent me to business school, and has been training me to do this job for years; Joe’s not going away. There will be a slight change in me being more of a facilitator, especially of strategy.

So this change in responsibilities is a precursor to Joe leaving Commonwealth?

Absolutely not. We have about 1,300 advisors and 400 employees, but we have no secretaries here; it is a flat organization, done on purpose. It reflects the personality of Peter and Joe.

What is the role of the independent broker/dealer now, and how will it change, especially in light of the current financial and market crisis?

Yes, our role is changing, in a couple of ways. External forces are coming into the market. Our competitors now are not only other broker/dealers, but RIAs, even technology companies.

One of my primary concerns is the well-being of our advisors. They’re under enormous pressure. You can feel the pain, it’s palpable, with many of my guys, though we do have advisors who see the opportunity as the big Wall Street names crumble. We’ll do what we can to help with money management.

We’ve been operating as a multimanager business model–we have a service bureau business for advisors that we haven’t marketed strongly yet–that will change by the end of the first quarter or early second quarter. We’ve increased our networking opportunities, increased our research staff, we’re about to extend our relationship with Ibbotson, and provide more information on fixed income.

Our Web site includes marketing materials “for turbulent times,” and we have dozens of advisor study groups that Joni Youngwirth’s practice management group has facilitated.

What about the rep force itself?

Recruiting is way up–you wouldn’t believe the calls we’ve gotten in January alone–but there’s a lot more tire kicking than actually moving. Some advisors [in the wirehouses] are paralyzed by this market.

We remain focused on targeted growth, and our model is not conducive to new and smaller producers. We provide a complete solution, and we prefer reps [who move to us] to have one or two assistants. You can’t be all things to all people.

What keeps you up at night?

While it doesn’t keep me up at night, I expect the regulatory pendulum will continue to swing–can a pendulum do a 360? I try not to spend too much time worrying about things I can’t control. We are planning on increased regulation, and we just passed our last FINRA exam.

Things have gone well for us, but I worry about us not resting on our laurels. We just had our highest advisor satisfaction rating ever–94.9% [in an annual internal survey]–our revenue for 2008 was up 3%, we handed out bonuses [to employees], and we won another “best place to work” award.


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