What You Need to Know
- The BD's keys to success have included good timing, maintaining its culture and treating people well, its execs say.
- The company has no intention of being acquired.
- It has become increasingly challenging to compete against larger broker-dealers.
While celebrating the start of Fairfield, Iowa-based broker-dealer Cambridge Investment Research’s fifth decade, executives of the company, founded 40 years ago on March 10, reflected back on how treating people well — advisors and clients alike — has allowed the firm to weather challenges including intense competition and even thrive.
“When I was 27, I started the business and so it’s hard to think that at that time I was thinking I’d do this for 40 years,” Eric Schwartz, Cambridge founder and executive chairman of the board, admitted to ThinkAdvisor during a recent interview.
“I don’t think most people at age 27 are thinking that far out in the future. So it is kind of eye-opening to think we’ve been going that long and where it’s gone in that time, especially since really the first 12 years was learning everything that I should have known when I started it,” he said.
The company’s revenue in 1992 was about $500,000, Schwartz recalled. Now, “we have large numbers of advisors that do more than that amount of business” on their own at the firm, he said, noting most of its growth started that year.
The success that Cambridge has achieved can be chalked up to at least a couple of factors, he explained: “We started in the right place at the right time. It was early in the development of the independent broker-dealer space and the fee-for-advice space … and we jumped on [that] approach, and not long after 1992 we were doing 40% of our business in fees when the industry was 1%.”
The company was “probably one of the smallest broker-dealers in the country in 1992 and now we’re one of the largest,” and its ability to achieve that is “really a tribute to getting into a positive trend and just staying with it [and] staying true to our values,” Schwartz said.
Pointing to another key to success, Amy Webber, the company’s CEO, said: “What makes me most proud is the success we’ve had in surrounding ourselves with a like-minded, innovative leadership team that can help us as we grow” and “maintain the culture” of the organization.
The fact that they have retained control of Cambridge “continues to be important,” she said, adding: “We’re in it for the long term.”
What’s Next for Cambridge
The company has clearing agreements with National Financial and Pershing, but also has assets and institutional relationships with Charles Schwab/TD Ameritrade and Fidelity’s institutional platform, Webber noted.
“Over the next three to six months, we will be adding all of those institutional platforms onto our WealthPort platform,” she told ThinkAdvisor.
Cambridge “started a journey of a digital transformation a couple of years ago,” Webber explained. Although it was a five-year plan, “COVID helped accelerate that [and] we’re now already implementing some things that we may not have done as quickly,” she noted, estimating the journey will now be completed in about two years.
Meanwhile, Schwartz said, “one of the things we have worked on for a number of years — and we’ll probably be implementing in the next year or so — is creating a share class [with] super voting rights so that even if senior management doesn’t own 90% of the company, or 85% like it has historically because of me, that they still have control of the voting shares.”
The executives are looking to make sure “we can keep private control of the company,” regardless of who becomes its owner down the road, he said, adding: “We have no intention of ever being acquired” and “we don’t really want to grow by buying some huge competitor of ours.”
But “we are talking to some” smaller firms with up to $100 million in annual revenue and “we will probably acquire some, although we look at it as more a recruiting engagement.”