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


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.


What do you think?

View comments

Recommended for you

Upcoming Event

Sep 24


Diversity & Inclusion Awards

Attend an event celebrating diversity and inclusion as well as recognizing those who are leading the financial services profession in this important endeavor. Join InvestmentNews, as we strive to raise awareness, educate and inspire an... Learn more

Featured video


Forecasting a revolution in financial planning tools

Special projects editor Liz Skinner and reporter Ryan W. Neal discuss the technology behind financial planning software and how it is helping spur change in the adviser and investor experience.

Latest news & opinion

Former adviser gave college football players money to win business later

Louis 'Marty' Blazer said he gave $10,000 to a player with hopes he could represent him when he turned pro.

Finra suspends former star LPL rep who borrowed client cash

Regulator says James E. 'Jeb' Bashaw borrowed $200,000 from a client in 2013 without telling LPL.

Higher tax bills following reform surprise clients

Lower withholding and the loss of state and local deductions throw many for loop.

The drawback of Richard Thaler's 401(k)-Social Security idea? Social Security itself

Observers think Congress would need to address Social Security's funding levels and offer enhanced protections for the concept to work

Social Security funding outlook improves slightly

Retirement reserves extended one year; disability fund by 20 years


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 It'll help us continue to serve you.

Yes, show me how to whitelist

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


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print