John Rooney, managing principal of Commonwealth Financial Network’s San Diego office, jokingly says he won’t be able to afford to live in the same neighborhood as LPL’s Bill Dwyer following LPL’s IPO on Thursday, but among the leadership ranks of the independent BD where he’s spent the last 22 years, he says there are no regrets on staying privately owned.
“It’s a question of how you grow,” said Rooney (left) in a Wednesday interview, noting that Commonwealth has only done one acquisition “in our entire history,” in 1992, a “lightyear ago,” and that was of a broker-dealer with only 70 reps. Over the last 10 to 15 years, Rooney says Commonwealth has looked at other broker-dealers to acquire, but passed upon realizing “we didn’t want half the advisors; we’d rather pick the one, two, or three advisors “who embrace and love the culture” at Commonwealth. That approach, he says, creates a “fortuitous cycle,” where there’s a greater likelihood of recruited reps fitting in well with the firm, which helps the home office support staff to provide great service, since “they’re not dealing with jerks.” Commonwealth, he says, is a “reflection of the advisors, and they’re a reflection of the group; they don’t join us because we’re the highest paying shop on the street.”
Philosophically, says Rooney, a private company “is a reflection of your values and principles,” and that Commonwealth’s intent has never been all about “maximizing the bottom line or being the biggest company out there. What gives us satisfaction—meaning the partners—are the JD Power and Boston Globe awards,” referring to Commonwealth’s recent awards on being among the best firms for advisors and best firms for women to work in the Boston area.
Rooney suggested that when it comes to other large IBDs, not everyone follows that same growth strategy. “Look at how Cambridge [Investment Research] and Commonwealth have diverged in the last few years,” quoting statistics that from 2006 through 2009, Commonwealth’s revenues grew 24% and rep count grew by 18%, while Cambridge grew 29% in revenue but on a 63% increase in rep headcount.
As for LPL’s reps, Rooney said “It’s interesting when you look at the advisors who are selling their stock.” While they’re limited to selling only 65% of their holdings in the IPO, Rooney said many are “selling the maximum amount,” deadpanning : “It’s an interesting vote of confidence in their broker-dealer,” though he was quick to add that many LPL executives are selling much less than the maximum in the IPO that launched Nov. 18 at $30/share.