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May 28, 2015 at 06:12 AM
In an article published in the January 2006 issue of Investment Advisor Magazine, I wrote about how a Producer Group can extend the reach and profitability of a rep’s practice. In the past two years, we’ve seen exciting new value propositions coming from these producer groups.
For those not familiar with producer groups, they are a large grouping of financial advisors (also called Super OSJs) that joins together with either a single OSJ (Officer of Supervisory Jurisdiction) or multiple OSJs within the group, with all advisors in the group tied to a single broker-dealer. In my 2006 article, I pointed out that when advisors join together they reap benefits beyond what they can get from the broker dealer alone:
- Scale that will bring more to the group than what they could get individually (better payouts, lower ticket charges etc.)
- Networking and friendships with like-minded advisors (Independent, but not alone)
- Assistance in making inroads into specific marketing niches to help them grow their book
Today, broker-dealer partners are increasingly recognizing the added value of producer groups and are actively supporting their growth. Here are a few producer group examples that bring a new dynamic to the independent broker dealer channel.
Benefit 1: New Revenue Streams for Advisors
Reps generally think of their payout in terms of 85% to 90%, so imagine reaching the 120% payout level! One particular producer group works toward accomplishing this by having unique outside business activities, then sharing the profits from these endeavors among the group members (they refer to them as revenue silos).
This group has created an Endowment Strategies Fund, a Co-Fiduciary 401K and assembled an RIA with $580 million under management. The super OSJ of this group says that while the rest of the industry is “fretting about the DOL proposal,” their group instead created a Fiduciary IRA with over 12,800 small IRA accounts with $500 million. “The scale is there to create profitable, client-centric offerings while sharing both the expertise and the profits” with all the members of the group, the super OSJ says.
To complete their value proposition, this group also offers equity participation so members have ownership in the group. What I find appealing about this group is that they are thinking like a broker-dealer and expanding revenue sources. However, unlike broker-dealers, they share the additional income with everyone in the group.
Benefit 2: Using Social Media for Retiring Clients
To set themselves apart, another producer group developed a unique proprietary program implemented through social media that focuses on the three phases of retirement (Active – Slowing Down – Inactive). The group runs geographical and industry campaign ads on various social media outlets. Advisors are fully trained and licensed on the program, with the goal of being the only source the new clients turn to for their retirement plans.
Employers love this tool and will frequently offer you as the exclusive source for their retiring employees because they feel assured that a single source will best meet their employees’ needs. Here’s what differentiates this platform: the producer group does all the legwork in generating the leads, setting up the advisor to follow up with the client and complete the retirement planning process with them. A $1,500 investment into a campaign will typically generate 50-75 potential baby boomer clients.
