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The Waiter Test: Recruiting Tips from Commonwealth's Bloom

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Many broker-dealers speak about the importance of their corporate culture and how careful they are to make sure there’s a “good fit” when they are recruiting new advisors. Commonwealth Financial Network CEO Wayne Bloom has a unique way to assess how well a prospective advisor would fit into his BD. After the recruiting team has done all its work, performing its compliance due diligence on the advisor, and after the prospect has visited the home office, Bloom takes them to dinner. He’s not interested in whether they’re vegetarians or meat-eaters, or whether they like alcohol too much or keep their elbows on the table. He wants to see how the prospect treats the waiter or waitress. Are they polite and gracious, or are they bullies? Do they show respect to the people who are serving them?

“You learn a lot from taking someone to dinner,” Bloom said, “because how you treat people matters.” If a prospect mistreats someone like a waiter, they’re more likely to mistreat a service person in the home office, and Commonwealth doesn’t want those people.

The flip side of the “waiter test” is that Commonwealth Financial strives to treat its people well—employees and its affiliated representatives. In an editorial roundtable on Nov. 7 in Phoenix during Commonwealth’s national conference, the independent broker-dealer’s leadership of Bloom, John Rooney, Rich Hunter and Andrew Daniels spoke about the Commonwealth culture, the state of recruiting and the benefits of being a private company.

The Commonwealth culture of treating people right came to the forefront during the financial crisis, said Bloom. “We didn’t lay anybody off during the recession,” which not only benefited its home office staff, but its advisors as well. “I don’t remember a time when our advisors needed us more,” Bloom recalled. For Rooney, managing principal who runs the broker-dealer’s San Diego office, that no-layoff decision springs from Commonwealth’s ownership structure. ”One of the benefits of being a private company with no debt is having the flexibility” to make those kinds of decisions without having to justify a difficult short-term decision to shareholders.

Daniels, Commonwealth’s managing principal of business development, said that “being good people is good business.” Having a focus on hiring good people and recruiting good people, “is not rocket science, but there’s a dearth of that” in business in general, said Daniels, who heads the BD’s recruiting efforts. Focusing on good people, he said, creates a “virtuous cycle” that benefits employees and advisors.

There’s been a bit of a boom in broker-dealer acquisitions—think Raymond James acquiring Morgan Keegan, or the nascent broker-dealer empire of RCS Capital’s Nicholas Schorsch, which now includes First Allied Securities and Investors Capital, all run by Larry Roth—with the intent apparently to build scale to offset IBDs’ notoriously slim profit margins. Bloom admitted that Commonwealth has “looked at other firms” as acquisition targets. However, he said that “we’d only want 10% of their advisors,” who’d fit into the Commonwealth culture and be big enough producers, so it doesn’t make sense to acquire the other 90% as well. Rooney said, “We’d love to do acquisitions” if they made sense, while Hunter, the longtime CFO of Commonwealth who recently became its president and COO, said that “without organic growth, it’s tough to grow.” Putting a period on the decision to avoid acquisitions, Rooney said that Commonwealth’s “senior people are all in line with that” decision.

The State of Recruiting

So how is recruiting going at Commonwealth, which has about 1,500 representatives and some 600 employees? “Calls are coming in regularly,” said Daniels. As for the so-called breakaway brokers, “we thought we’d get many, but there have been very few phone calls” from wirehouse advisors. However, he said Commonwealth has been “stunned by how many calls we’re getting from Schwab and TD Ameritrade-type RIAs.”

Regarding those existing RIAs, or any other advisor for that matter, Bloom said, “we don’t care how they affiliate” with Commonwealth, as long as they are a good cultural match. Commonwealth has launched its own RIA custodial division. Rooney put it more bluntly: “We don’t care if you’re an RIA or an IAR” if an advisor is a cultural fit, and “if you make money, we make money.”

Bloom said that while “our technology is how we get them to the table, the most popular thing we offer isn’t tangible,” referring again to Commonwealth’s culture. That’s why during the recruiting process, Commonwealth encourages prospects to “call any of our advisors; Google Commonwealth in your area,” and call any of the reps in the search results to learn from them what it’s like to affiliate with Commonwealth.

Daniels said that “when we bring on people, they spend a week learning Commonwealth’s ‘Common Knowledge,’ which allows those hires to understand the culture and communicate it to advisors. Hunter said, “we can do that because we have the highest producers” in the business, with “three advisors to each employee, compared to six or seven advisors” per employee at competing BDs. Rooney said that Commonwealth has stayed true to itself, turning down even very big producers when they weren’t a fit. Recruits “still need to be compliance clean, nice and client-centric,” Bloom said. “Everyone has principles until they see the [production] numbers,” said Rooney, who noted in turning down some reps, “many of these people have never been told ‘No.’”

With founder and Chairman Joe Deitch taking a slightly more low-profile role at Commonwealth (though he was an obvious presence during the conference), Bloom argued that there’s plenty of continuity at the company: “We have the same people running the place; we haven’t changed,” nor has Commonwealth’s culture of valuing above all “quality and community.” Then what’s next for Commonwealth, if big acquisitions are off the table? “We’ll continue to grow,” said Bloom, but “we don’t need to create a big splash.” Are there dangers to growth, especially when it concerns the culture? “Advisors used to say to us, ‘Don’t grow!’, but I don’t hear that anymore,” said Rooney. Bloom concluded by saying that Commonwealth “will remain boringly awesome.”