Top indy broker-dealers post a modest gain

Many see little benefit from stocks' surge

Jan 19, 2004 @ 12:01 am

By Bruce Kelly

The leading independent-broker-dealer firms participating in this year's InvestmentNews survey eked out, in aggregate, a modest gain in gross revenue compared with last year's.

That tally includes a range of fiscal-year reporting periods, in some cases going back to the end of 2002.

And many of the firms that reported for 2003 apparently had not benefited from the significant turnaround in the stock market last year, when most major indexes were up more than 20%.

The top 50 independent broker-dealers collectively reported an increase of just 4.6% in terms of gross revenue, based on available reports of their most recent fiscal years.

In all, the top 50 independent broker-dealers saw close to $7.17 billion in gross revenue during their most re- cently reported fiscal years. That is an increase of $317 million compared with that of a year earlier.

Still, some industry observers see little correlation between a rising stock market and booming business for independent firms.

"Just because the market was up doesn't mean new money was coming" to brokers and advisers, said Matt McGinness, an analyst with Cerulli Associates Inc. in Boston. "Some firms did better than others because of recruiting quality advisers."

LPL's fundamentals

One big winner, and a top recruiter, in 2003 was Linsco/Private Ledger Corp. "I'd like to say there was a magic formula, but it really was fundamentals," said Jim Putnam, managing director at the firm, which has headquarters in Boston and San Diego.

LPL leapfrogged AIG Advisor Group Inc. to become the top broker-dealer entity in terms of gross revenue, according to the InvestmentNews survey. LPL saw its gross revenue rise 14.8% to $891 million.

Meanwhile, AIG Advisor Group, like many of its insurance-company-owned peers, saw gross revenue slip despite the rising tide of the stock market. Gross revenue for the five broker-dealers that make up the AIG Advisor Group fell $5 million to $793 million.

Mr. McGinness said that insurance-own

ed broker-dealers have faced particular difficulties.

Many brokers and advisers with insurance-owned firms are faced with making the change from being an insurance agent to selling more broker-dealer services, such as financial planning and investment management. "It's a difficult transition for them," he said.

Last year, LPL stressed communication with brokers' clients more than ever, Mr. Putnam said. He added that in 2003, the firms had sent more letters and updates to clients, including research and updates on asset allocation, than in the previous three years combined.

Mr. Putnam said that LPL's assets in fee-based money management programs had ballooned last year to $21.9 billion, from $15.5 billion in 2002.

LPL and NFP Securities Inc. combined nearly matched the top firms' aggregate gain in gross revenue.

NFP, an Austin, Texas, broker-dealer, saw its gross revenue jump to $300.4 million for its most recent fiscal year, according to industry sources - an increase of $180 million. LPL's gross revenue was up $115 million.

NFP Securities is a broker-dealer subsidiary of New York's National Financial Partners Corp., which went public last year.

And National Financial Partners, which has an aggressive strategy of acquiring financial planning firms, is getting off to a busy start in 2004. This month, it announced that it had acquired three more firms and had a definitive agreement to acquire one more.

Those four firms had about $45 million in revenue in 2003, according to National Financial.

The rising stock market, however, did provide some good news for many independent broker-dealers. Some executives said that while business had been flat in the first quarter last year, sales had improved in the second quarter.

Cutting reps

After that, "things took off," said Steve McWhorter, chairman and chief executive of Securities America Financial Corp. in Omaha, Neb., and its broker-dealer subsidiary, Securities America Inc. "Reps did more business in the second half of the

year."

Brokers and financial advisers had become more optimistic about the markets, he said. Still, some of their clients' thinking and psychology still remained somewhat "fragile" due to the lasting impression of corporate-governance scandals.

Some firms also got rid of low-producing brokers as part of their business strategy. Investors Capital Corp. of Lynnfield, Mass., cut about 200 registered representatives who each produced $30,000 or less in gross dealer concession, bringing the firm's total to 900 affiliated brokers.

A number of firms declined to provide up-to-date information about gross revenue. Their totals are based on recent published reports or InvestmentNews estimates. But the rising market certainly provided a panacea to many in the business. The previous two years had left many scars.

"There was a lot of relief in 2003," said Theodore Charles, president and chief executive of Investors Capital.

0
Comments

What do you think?

View comments

Recommended for you

Upcoming Event

Oct 22

Conference

San Francisco Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video

Events

The secret to working with next gen clients?

Alan Moore of XY Planning says working with millennials isn't as difficult as some advisers make it sound. Here are three strategies for success.

Video Spotlight

We started as a boutique firm with huge ambitions. Schwab was a perfect fit.

Sponsored by Schwab Advisor Services

Recommended Video

Keys to a successful deal

Latest news & opinion

10 millennials making their mark in Washington — and beyond

These next-generation leaders are raising their voices and gaining influence over financial advice regulation and legislation.

10 highest paid professions in America today

These are the top-paying jobs in the U.S., according to Glassdoor.

Former Merrill Lynch star broker Thomas Buck sentenced to 40 months in prison

He pleaded guilty to securities fraud in 2017; charged clients excessive commissions.

Rules for claiming Social Security at 70

Some individuals' benefits will begin automatically; others have to take action.

Bills would allow employers to help workers pay off student debt, tax-free

Tackling growing loan burdens sparks bipartisan interest on Capitol Hill.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print