National Financial Partners, founded in 1999 and headed since then by Chairman, President and CEO Jessica Bibliowicz, came to prominence as the first of the new breed of rollup firms of advisory practices. By going public in 2003, NFP has gone further than most such rollup firms, for whom a public offering is still just a glimmer, even if becoming a public company has been a bit of a roller coaster ride for NFP, its affiliated firms and all its shareholders. (Bibliowicz is also a member of the AdvisorOne Top Women in Wealth for 2010, and was profiled by Investment Advisor’s Melanie Waddell way back in 2001.)
But according to James Poer (left), who became president of the independent broker-dealer arm of NFP—NFP Securities—in 2008, over the past two to three years NFP Securities has quietly changed its focus in addition to its name regarding how it wants to interact with advisors of all kinds, and beginning now it will no longer be quiet.
NFP Securities, now known as NFP Advisor Services Group, “was in the background, a support business for the sister companies in the NFP family,” said Poer in a Monday interview. “In the darkest hours of the financial crisis,” Poer recalls, “we made a significant investment in independent financial advice, in our broker-dealer, because we believe in the independent model.” The first step in that evolution was changing its name: “We thought ‘Securities’ didn’t fit,” he said, because that word “means BD; it means transaction.” As NFP Advisor Services Group, the company is trumpeting that “We’re a financial services company that serves the high-end financial advisor so they can serve their clients.”
The second step was to make significant investments in technology, in what Poer calls “multiple chasses that serve more than one channel.” While NFP Securities’ traditional approach of serving independent registered reps and IAR reps of the NFP corporate RIA remains a “vibrant part of our business that will continue,” NFP Advisor Services now welcomes as well those reps that have their own RIAs, Poer says, and dual registrants who “want to bring all their client data and their own compensation data “into one workstation.”
The third step in NFP Advisor Services’ evolution was to make “significant investments” not just in its technology, but in “talent, process and service” to support those advisors in the independent and dually registered space, which he argues is still “very fragmented.”
The final step, he says, is about “getting our message to the market” through stepped-up advertising, recruiting and
roadshows designed to showcase NFP’s definition of independence and what it believes is its “very sound, unique” proposition to the advisor universe.
In 2010’s Q4, the Advisor Services Group (ASG) contributed significantly to NFP’s revenue and bottom line. Q4 revenue of $58.9 million for ASG comprised 20.7% of total NFP revenue and was up 23% over 2009’s fourth quarter. ASG’s adjusted EBITDA for the quarter ended Dec. 31, 2010 was $3.3 million, a margin of 5.5%. AUM at NFP’s corporate RIA was $9.3 billion as of year-end 2010, up $1.4 billion from the prior year.
The Advisors NFP Is Looking to Attract
What kind of advisor is NFP Advisor Services looking to attract to its model?
“We’re less channel specific than profile specific,” Poer says. “We’re looking for advisors who want to go to that next level—not just good salespeople, but people who want to take a practice and make it a business.” That means reps of other independent BDs, but also in the breakaway broker space.
NFP’s strategy in serving advisors is to “focus on a day in the life of a financial advisor and their staff—in terms of process and engagement, that staff is as important as the advisor,” says Poer. Like many BDs, NFP Advisor Services Group does have an advisory council made of up of reps and advisors, but Poer points out it also has a staff advisory council, since the advisor’s assistant and staff is “where the rubber meets the road.”
Poer cites as NFP’s guide to helping its reps and advisors the findings of a 2008 study by the Aite research group that the average advisors spends 34% of his or her time in client-facing activities, but that the use of efficiency-improving technology raises that client time to 52%.”The more integration points we can offer an advisor,” the more efficient they become and the more time they can spend with existing clients and getting new clients, says Poer. “Their needs are account aggregation and CRM and portfolio accounting, and we integrate all of that into one workstation—we create more time for them to grow their businesses and reduce their staffing needs.”
After all, he says, the independent advisor universe is “still a cottage industry” where advisors are “forced to plug functional holes—like with a CRM system or account aggregation.” That leads to advisors taking steps to “solve for their symptoms rather than the broader disease.” Yes, providing the right products is important, but NFP’s approach is to provide access to all the traditional investment vehicles, though he says “we don’t opine on money managers,” and if an advisors wants to manage assets on his own, they can do so at the model level. But since NFP wants its advisors to “focus on the ultra-high-net-worth space,” it focuses on providing access to alternative investments. Poer also sees benefits to wealth managers in NFP’s strength as “one of the largest providers of insurance and benefits.”
NFP is a compelling choice, he argues, for those wealth managers who are “looking at both sides of the balance
sheet for clients” and might use everything from long-term care insurance to property and casualty insurance coverage for issues like wealth transfer. After all, he says, “business owners and executives who have high net worth have personal needs and corporate needs” that go beyond investing into personal and corporate risk management, and providing that “from one central location” has business-building benefits for the advisor and wealth preservation benefits for the client.
While declining to say exactly what NFP Advisor Services Group’s growth goals are—it currently has 1,000 independent contractor reps—Poer did say NFP is looking for “intentional growth—our desire is to grow relationships and align ourselves with like-minded professionals” who he characterizes as “quality high-end advisors” who appreciate having access to key executives at the firm. In a typical 200-rep broker-dealer firm, for instance, he says NFP’s “fit is really right only for the top 10% of those reps.”
As for the overall advisor universe and the effects of Dodd-Frank, Poer says he expects to see continued consolidation, especially among smaller broker-dealers like that hypothetical 200-rep BD. However, Poer doesn’t think “you’ll see a lot of small broker dealers being acquired. You have to have a high degree of confidence that you will be able to retain all those advisors—there’s high risk there.”