Who would be better at running an independent broker-dealer than an independent rep?
That's the thinking of investor John Sykes, who put his personal financial adviser, Gordon Loetz, in charge of his latest investment, GunnAllen Holdings Inc.
Mr. Sykes, who is chairman of the company, and Mr. Loetz, its chief executive, have big plans for Tampa, Fla.-based GunnAllen Financial, the company's broker-dealer subsidiary, which has 750 affiliated representatives and produced about $120 million in gross revenue last year.
"If it was just an independent-broker-dealer business, we probably wouldn't have done it," said Mr. Sykes, who at 72 is a newcomer to the business. "I said to Gordie, 'If I got a bank involved, take a look at it, and then in the back of your mind, think of
Raymond James [& Associates Inc. of St. Petersburg, Fla.].'"
Mr. Sykes is far from the only notably wealthy investor with no experience at an independent firm who recently placed a big wager on independent broker-dealers.
He said that he was buying the controlling stake in GunnAllen in September, just as the market began its historic collapse.
Mr. Sykes plans to align the firm with a variety of other financial services offerings, such as NorthStar Bank in Tampa, where he is also chairman and the largest shareholder, and potentially a
trust company.
With that in mind, he sees no reason why GunnAllen's advisers won't generate $500 million in annual revenue by 2014.
"I've given Gordie my vision. It's up to him to execute it," Mr. Sykes said with a laugh.
He made his fortune in the call center business through equity in Sykes Enterprises Inc., also of Tampa, which he no longer controls.
Outside of the call center business, Mr. Sykes has already put large sums of money to work in a variety of ways.
In 1997, he branched out into racehorse breeding, buying the 1,000-acre Clover Leaf Farms II Inc. in Reddick, Fla., reportedly for $5 million.
Mr. Sykes has been generous to educational institutions too.
He and his wife have donated $38 million to the University of Tampa and more than $10 million to Queens College of Charlotte in North Carolina.
CAN'T SLOW DOWN
According to local business reports, Mr. Sykes is known around Tampa for his inability to stay retired, and he clearly intends to shake things up at GunnAllen.
Also, a name change is in the works, and a new brand will be announced soon.
Mr. Sykes knows how to create wealth. In 1996, when he was still running the call center company, he made the Forbes 400 list, with an estimated net worth of $520 million.
Some in the independent-brokerage business scoff at the notion that even the wealthiest interlopers can make a successful run at a highly competitive business known for thin margins, long hours and compliance that many believe focuses on the picayune.
But others say the bet is too good to pass up.
"I know it's a terrible time in the market, but that doesn't change the demand for advice," said Dennis Gallant, president of Gallant Distribution Consulting of Sherborn, Mass.
"That's attractive to an outsider," he said. "Outsiders often have a fresh perspective."
And those supplying that fresh perspective are also supplying the coin.
Like Mr. Sykes, Dr. Phillip Frost, a member of the Forbes 400 who made his fortune in pharmaceuticals, has been making a mark in the independent-brokerage industry.
Dr. Frost is the largest shareholder of Ladenburg Thalmann Financial Services Inc. of Miami, and during the past 18 months, that firm has acquired two independent broker-dealers, first Investacorp of Miami Lakes, Fla., and then Triad Advisors Inc. of Norcross, Ga.
According to Forbes, Dr. Frost, 71, was worth $2.2 billion last year.
Other recent wealthy investors come from other areas of the financial advice business. Philip Purcell, 65, and David Pottruck, 60, were chief executives of Morgan Stanley of New York and The
Charles Schwab Corp. of San Francisco, respectively.
The two are among a group of investors who launched a new independent broker-dealer and registered investment advisory firm in the fall, HighTower Advisors LLC of Chicago.
Both had tens of millions of dollars' worth of shares of company stock, along with millions in severance, before leaving their firms.
Aligning a variety of businesses, including offering tax returns to clients on a discount, is a key part of Mr. Sykes' plan for GunnAllen, he said.
"The more that we're able to grow [NorthStar] bank, the more we're able to capture the monetary value of GunnAllen to the bank" through products such as cash sweep accounts, he said.
Tim Smith, InvestmentNews
data editor, contributed to this story.
E-mail Bruce Kelly at [email protected].
