What makes an outstanding broker? Why do some reps get more out of their jobs — both financially and personally — than their peers? How is it that some brokers build a business and a web of relationships with clients that evolve into a rewarding community of interest for all participants — while others struggle with hard-selling, cold calling and endless turnover in their books?
Becoming a top broker has never been easy. But it sure was easier to look good a few years ago than it is today. Then, a broker could earn his client's loyalty by providing some solid stock tips, identifying some promising funds and, maybe, getting customers in the queue for a hot IPO.
Not so today. The brokers who excel — the kind of brokers selected for Registered Rep.'s annual Outstanding Broker Award — are the ones who continue to master new skills and, in general, are the type of men and women who go out and find the opportunities for themselves and their clients. These professionals are well versed in 529s, Monte Carlo regressions, UGMAs and UTMAs, UITs and IMAs. They go in for additional training (see the story on page 17) and they continually look for ways to strengthen relations with clients, often by taking responsibility for comprehensive financial planning and management.
“Many brokers have a deep understanding of investments. But it's the rare broker who can help clients define their goals,” says Scott Slater, a director at the Spectrem Group, a consultancy. “Brokers say, ‘OK, my client wants me to double his money.’ But many brokers never ask why, what they want to do with that money. It sounds soft, but that's what it is, life planning.” In a recent Spectrem study, wealthy clients indicated that they expect their financial advisors to provide a thorough analysis of their needs and goals and then find the investments and products that achieve those goals — even if they include nontraditional brokerage products, such as life insurance or mortgages.
Thanks to the marketing efforts of major firms, those expectations are now shared by ordinary investors, who have been told that their reps are, indeed, financial advisors. And, even as wirehouses still demand a certain level of productivity among brokers, what they say is that they want reps to be relationship builders. “Production is one of many measurement standards,” says Merrill Lynch Chairman David Komansky, who began his 35-year career as a rep. “In my view, building relationships, gathering assets and doing the right thing are more important and will lead to greater success than concentrating on short-term production.”
As brokers evolve into financial advisors, the people connection becomes more critical, says Larry Silver, director of marketing at Raymond James. “We look to find people who are relationship builders to clients, who can be full service because they are the ones who are going to survive in this market,” Silver says. The firm puts potential recruits through extensive testing in an effort to find “bright people who are energetic and empathetic.”
Rick Peterson, president of executive recruiting firm Rick Peterson & Associates in Houston, says what makes an outstanding broker is “growth, not so much in production, but in knowledge.” If a rep is continually studying and learning about the latest products, regulations and technology, production will follow, he says. “The most important thing is to stay as knowledgeable as possible in today's ever-changing investing environment.” He advises reps to go to investment seminars, listen in on company conference calls, read as many financial publications as they can and watch related TV shows.
To get a handle on what makes an outstanding broker, circa 2002, Registered Rep. canvassed branch managers, headhunters, brokers, clients, consultants and senior industry executives. The result is an eclectic mix. They range from those who built a business by wrapping mutual funds (Angeli Forster of UBS PaineWebber) to managed account devotees (Erik Weir of Round Hill Securities). The most common specialty — no surprise — was retirement planning.
But in general, the top brokers find their own niches. Industry consultant Andre A. Cappon, president of The CBM Group, which advises financial firms on sales organization management, says, “I am not saying I have seen every kind of business, but I have seen several types of brokers succeed. There are asset gatherers who rely on others for investment advice, and there is the broker who acts like a portfolio manager and analyst.” There are also specialists in stock options, investments for doctors, fixed-income portfolios for seniors, education programs for new parents — you name it. “I find that to be successful, a broker needs to concentrate in one or two narrow services,” Cappon says.
Take Outstanding Broker Award winner Richard Hearn of Starcare Associates in Newport Beach, Calif., who now specializes in the financial plans of people with “special needs.” How did he arrive at that specialty? His son was born a hemophiliac, which taught him how to handle the emotional and financial issues that a chronic illness presents to clients. “I realized that few advisors have the expertise to help families with special needs,” Hearn says. “And I found out that there are 40 million disabled people, and they all have special needs. So, that's a large part of what I do.”
Peterson says the best brokers are “always putting clients' interests first and everybody else's interests dead last.” This, of course, is what reps are taught: They have a fiduciary responsibility to their clients.
That's not just ethics, it's good business practice. Brokers who demonstrate a commitment to clients year in and year out are more likely to keep their customers when the market is soft. Take Joseph Evelo, of the Evelo Group at Salomon Smith Barney in Cincinnati. Evelo's client Bob Buck, president of Cintas Corp.'s uniform rental division, says Evelo was “rock solid” during the stock market crash in 1987. “His calming influence during tough times is very important.”
That calming influence — and a long-range perspective — make Carl Stuart, of Carl Stuart Investment Advisor Inc. at Raymond James, an Oustanding Broker. Client Jim Weatherby says Stuart's long-term perspective that has helped him through the downturn.
As Cappon says, “If your customers are happy with you even in downturns, you will get referrals.”
In downmarkets, the natural inclination is to hide. “An outstanding broker should always be available in some form or fashion to all clients,” says Peterson — even if that means partnering up with someone to cover for each other during vacations. Robert B. Mitchell Jr., a 2002 Outstanding Broker, for example, knew that he had to go the extra distance to reassure his clients after September 11. He spent 12 hours a day, six days a week, for three weeks, contacting 500 or so clients trying to calm their fears about the market's future. That kind of handholding pays off: Mitchell has built a $150 million book at his A.G. Edwards branch in Greensboro, N.C., and had trailing 12-month production of $500,000. And he's lost only one client in the last 14 months.
It's not easy. But it is satisfying, says Allentown, Pa.-based Merrill broker Herman Rij. “The greatest part of our job is helping people to accomplish goals and achieve their dreams,” says Rij. “The worst thing is trying to help people accomplish goals and achieve their dreams.” Rij has done so well with this approach that he has become one of Merrill's top brokers — and got Komansky, who he's known for 20 years, to give him a personal reference for the Outstanding Broker Award. Komansky says Rij “understands people and their needs.”
So does Hearn, says client Rob Patterson, an Orange County, Calif., fire captain. Hearn “does business by relationships,” says Patterson. When his father had Alzheimer's, Hearn helped his mother Mary Jean find the right assisted living facility. And when Patterson's father died, they asked Hearn to deliver a eulogy.
Another similarity among successful reps: experience. While our brokers haven't necessarily stayed with one company for years, their longevity in the industry is something they all have in common. Only two are younger than 35, while three, including Darius Sanandaji, are 58.
A recent SIA survey says the average rep has been in the industry for 11 years and at the same firm for eight. The average among our brokers is 12 years at their firms and 21 in the industry.
Many outstanding brokers see their role as an educator as well. “The more they know, the easier it is to do my job,” says Outstanding Broker Mark Cortazzo, of Macro Consulting Group in Parsippany, N.J. And, humility doesn't hurt, he adds. “Earlier in my career, I had to show people how smart I was. I spoke in jargon when all they needed was a solution,” he says. “I realized it's not how complex you can make — because it is really complex — it's how easy you can make it.”
The theme of lifelong learning for brokers came up repeatedly in the quest for outstanding brokers. Steve Holbrook, an A.G. Edwards branch manager in Greensboro, N.C., says top-notch brokers “have to believe that they never know it all. They are constantly searching for more knowledge and continually trying to improve their ability to serve their clients.”
Award winner Mark Snyder, of Mark J. Snyder Financial Services of Medford, N.Y., has earned seven — that's right, seven — professional designations. Peter Harbeck, the president of SunAmerica Asset Management who has known Snyder for 20 years, says, “What's gotten him this far is that he's just done a lot of things over the years. He never stops learning; he's not one of these people who gets a field of expertise and coasts on in. He continues to take classes, do readings — he's always looking for ideas, better ways, better mousetraps.”
Mark J. Snyder
Firm: Mark J. Snyder Financial Services, clearing through Royal Alliance, a unit of SunAmerica
City: Medford, N.Y.
Years as a rep: 18
Years with current firm: 16
AUM: $70 million
Mix: 95% funds, 5% annuities
Specialty: Retirement planning
Why he's a tough customer himself: "We have to fight for his business. Just cause we're on the home team doesn't mean a thing," says Peter Harbeck, president of SunAmerica Asset Management.
If you really want him to, Mark Snyder will sell you insurance. But he'd rather not.
“Back in the early 1980s I was a relatively unsuccessful insurance salesman, and I was saying to myself, ‘Why don't I learn about financial planning to sell insurance?’” he says. “I became more interested in planning and decided I didn't like this insurance stuff anyway.”
Educating himself in financial planning began a process that almost never ended. In 25 years Snyder picked up seven different designations: ChFC, CLU, Registered Financial Consultant, Certified Fund Specialist, Chartered Mutual Fund Counselor, Certified Retirement Counselor and most recently the CSA, or Certified Senior Advisor.
He says marketing, initially, was his first concern — “having all these designations helps from a public perception standpoint,” he says — but adds that the education has given him an added depth in dealing with clients. And they agree: “I trust him implicitly,” says Ann Brayson, who, with her husband, is retired in West Palm Beach, Fla.
Meanwhile, the only thing Snyder's retiring from is getting more credentials: “This is probably enough.”
Firm: Starcare Associates, Linsco/Private Ledger
City: Newport Beach, Calif.
Years as a rep: 26
Years with current firm: 2
AUM: $70 million
Mix: 59% funds, 20% managed accounts, 15% insurance, 1% bonds
Specialty: Families with special needs, women and athletes
Expertise: Treating “affluenza,” which Hearn defines as the tendency of individuals who suddenly come into money to rapidly run through that money.
After his son Chip was born with hemophilia, Richard Hearn recognized that people with special needs also have special financial needs. Now he represents families of individuals who are disabled or sick, including dozens that required financial advice after winning a settlement related to AIDS-tainted blood transfusions. In some cases, he creates grantor trusts and always makes sure families on public assistance don't lose their benefits because of poor financial planning.
“I operate at the intersection of fortune and misfortune,” he says.
Hearn also advises athletes, many of whom suddenly get rich after years of struggle, and women, including widows who have never before had to handle their financial affairs. After Hearn moved from Boston to California 10 years ago, he kept many of his clients back east. Now, they are spread across 28 states. “Richard flies from L.A. to New England the way I drive to work — as often as is needed,” says client Bobby Piatelli out of Boston. “He comes when it's important to us, not when it's profitable to him.”
Firm: The Evelo Group, Salomon Smith Barney
Years as a rep: 27
Years with current firm: 20
Production: $4.2 million
AUM: $700 million
Mix: 4.8% stocks, 2% funds, 93% managed accounts
Specialty: Managed accounts
Management experience: Opened the Cincinnati Smith Barney branch in 1982 to get into management; in the first two years, he hired 20 brokers. He says he missed the contact with retail clients and went back to being a financial consultant.
Sure, production numbers aren't everything, but when they're $4.2 million, they say a lot. Joseph Evelo was an early player in transitioning to a fee-based model, converting most of his clients' portfolios in the early 1990s. In the decade since, production and assets under management have more than quadrupled.
He attributes the success of his group, which oversees $1.3 billion, to managing half the assets in-house and hiring outside managers for the rest. That strategy has put the group in the top 10 of Smith Barney's personal portfolio management and consultant management teams, and ranked Evelo in the top 40 of all Smith Barney brokers.
Two decades ago, Bob Buck, president of Cintas Corp.'s uniform rental division, hired Evelo to manage the company's profit-sharing plan. And he's never regretted the decision. Buck says Evelo proved himself during the 1987 crash. “He was rock solid,” he says. “His calming influence during tough times is very important.”
Robert Mitchell Jr.
Firm: A.G. Edwards & Sons
City: Greensboro, N.C.
Years as a rep: 17
Years with current firm: 13
AUM: $150 million
Mix: 10% stocks, 10% bonds, 75% funds, 2% insurance, 3% managed accounts
Specialty: Retirement planning and mutual funds
Author: Hopes to publish his memoir, tentatively titled “More Than My Childhood.”
Rejection is a part of every broker's daily life, making Robert Mitchell Jr. well equipped for the job. “I think I have that covered,” says Mitchell, who grew up in an orphanage after being abandoned by his parents when he was three. Because of that experience, he hates to reject anyone. “Who's a kid from an orphanage to tell someone he's too small?” That's why Mitchell has 800 clients.
Not that he suffers much rejection these days. Only one client defected in the past 14 months. And without prospecting, he averaged more than $1 million in new business per month last year. “I know I don't have as much as some of his accounts,” says client Ken Pittman, vice president of finance for Stockhausen Inc., a chemical company. “Still, he'll give me all the time I want.”
When Mitchell left the orphanage for college, he already had $3,000 in the stock market, thanks to earnings from odd jobs. Back then he invested in what he liked: Playboy and McDonald's. Since then, his taste has matured, and now his portfolio of funds blends domestic growth; growth and income and global growth styles.
Firm: Macro Consulting Group, SII Investments
City: Parsippany, N.J.
Years as a rep: 14
Years with current firm: 6
Production: $ 1.5 million
AUM: $100 million
Mix: 12% stocks, 8% bonds, 50% funds, 20% insurance, 10% managed accounts
Specialty: Retirement planning
High praise: “I never encountered an advisor as thorough, knowledgeable and client-oriented as him,” says Brad Coustan, managing vice president of US Allianz Investor Services. “He was not confident enough to use my annuity until we had gone through every page in the prospectus.”
Mark Cortazzo isn't keen on running with the bulls. Even when the market was at its peak, he was recommending value stocks and bonds. Perhaps that's why his assets under management doubled in 2001. He attributes most new business to referrals. With clients ranging in age from 53 to 73, Cortazzo's not big on risk. And he won't recommend products he hasn't invested in himself.
Client Bill Mayer says he spent hours with Cortazzo before handing over savings accumulated in 33 years at Warner-Lambert. Since then, Mayer has referred 20 friends. “Cortazzo has in-depth knowledge of everything that affects us,” Mayer says, referring to his retirement-age friends. “He's so enthusiastic. I have to tell him to slow down so I can catch up.”
Since September 11, Cortazzo has been focusing on quality of life issues, working shorter days and spending more time with his children. In the past, he probably wouldn't have said “that's cool” when a client wanted to spend a bundle on an African safari with her grandkids. Times have changed. “You could just feel her smile through the phone,” he says. “That's why I do this. That, and I'm competitive as hell.”
Firm: Forster Retirement Group, UBS PaineWebber
City: San Diego
Years as a rep: 18
Years with current firm: 6
Production: $1.5 million
AUM: $180 million
Mix: 10% stocks, 10% insurance, 30% bonds, 20% managed accounts
Specialty: Retirement planning
Let's do lunch: Despite a stable of 1,500 accounts — about 800 families — she still finds time for lunch with groups of five to eight clients at a time. “She doesn't have to work the way she works,” says colleague Adam Shaw. “She doesn't need the money.”
Angeli Forster isn't shy about why she's a broker. “I enjoy telling people what to do with their money,” she says. Her clients don't seem to mind.
“Me and a few other guys listened to her advice,” says Neil Freymeiller, 62, who retired from San Diego Gas & Electric two years ago. “All my money was in SDGE and she said, ‘You've got to move it now.’ You get scared when somebody tells you to move your money — ‘this is my whole life,’ I said — but she called it right, and with Enron, now I know why she did it.”
A colleague, Adam Shaw, points out that she undertook great effort in putting her clients in C shares long before it became popular. Most of her clients' funds are in C shares or wrap accounts. “It's not right to tell a client to leave a mutual fund alone for five to 10 years” just to avoid penalties in B shares, she says. “With C shares the client pays as he goes…they know we don't have a hidden agenda.”
Firm: Carl Stuart Investment Advisor Inc., Raymond James
City: Austin, Texas
Years as a rep: 23
Years with current firm: 4
Production: $1.2 million
AUM: $200 million to $225 million
Mix: 8% stocks, 2% bonds, 90% funds
Extracurricular activities: Hosted a two-hour radio show, Money Talk with Carl Stuart, on KLBJ for seven years.
Community involvement: Manages money for the Rotary Club Foundation, Planned Parenthood and the Lone Star Girl Scout Council.
When Carl Stuart decided to pursue a new career far from the Iowa town where he worked for his in-laws' clothing chain, he didn't have a specific job in mind. But then he read about “Careers of the '80s” in Good Housekeeping, and was sold on being a broker. His wife chose their destination, Austin, after Money described it as one of the fastest-growing cities.
His first job was at regional broker Rotan Mosle. After it was acquired, he followed his branch manager to several different firms. In 1997, he started his own business, affiliated with Raymond James, where he ranks No. 15. A transaction-based rep for 18 years, his business is now 75 percent fee based. He picks mutual funds based on the consistency of performance, continuity of management and low expense ratio.
Clients value his attentiveness. “I left one broker because there was a lack of communication,” says Jim Weatherby, information systems director for the Texas Legislative Council. “Carl communicates well and often, and has a very focused strategy.”
Erik C. Weir
Firm: Weir Capital Management, Round Hill Securities
City: Walnut Creek, Calif.
Years as a rep: 13
Years with current firm: 2
AUM: $80 million
Mix: 70% stocks and 30% bonds; 90% of his business is in managed accounts
Specialty: Managed accounts, asset allocation
How he solves gridlock: Weir owns three airplanes, including a six-passenger Cessna Turbo 206, which he uses to jet to client meetings in Arizona, California, Nevada and Oregon.
Once the Kobe Bryant of real estate, Erik Weir is now the Red Baron of independent brokers. When he was just 18, Weir got his real estate license and sold real estate while still in high school.
He found he liked stocks more, though. After time with Merrill Lynch and the former Donaldson, Lufkin & Jenrette, he moved to Alamo, Calif.-based independent broker/dealer Round Hill Securities.
His overseer, Tom Sboto, executive vice president, is better for it. “Some people enter into opportunities in their life, and many go into it with a soft step, but he didn't doubt his abilities one minute…anyone you talk to that knows Erik is impressed with his abilities; I feel good when I'm around him.”
Weir, who now owns an airplane leasing business, has been focusing more and more on managed accounts, seeing them as the way to go as the bull-rush days of the 1990s are further in the rearview mirror. “Buy-and-hold outperformance is behind us,” he says. “Prospective clients aren't comfortable with research from the wirehouses any longer…there's value to someone who will kick the tires and do a lot of research.”
Firm: Rij, Osborn & Cort Group, Merrill Lynch
City: Allentown, Pa.
Years as a rep: 32
Years with current firm: 30
Production: $2.5 million
AUM: $600 million
Mix: 20% bonds, 30% funds, 10% insurance, 40% managed accounts
Specialty: Risk management
Try and try again: At 25, freshly armed with an MBA, Rij applied to be a broker at Merrill, and was rejected. “You should be an analyst,” the manager said. Two years later, he tried again, and was hired. A new manager reckoned that anyone that persistent would be great at cold calls. Rij ended up being one of Merrill's first $1 million brokers.
It's not surprising that prospects ask Herman Rij about retirement. It's just that all too often, they're asking about his retirement. “I'm not leaving anytime soon, it just looks like I ought to,” he says. “They really want to know what happens to their money if I'm not here.” The answer, Rij says, is that his multi-aged team of experts — including a CPA and an estate planner — will take over.
His long-time boss David Komansky calls him the “epitome of professionalism” and cites his concern for clients as a key strength. Rij says he still stays awake some nights worrying about a former client — a widow — whose financial needs were covered as long as she didn't take big risks. Then, at her daughter's prompting, “she started asking about Cisco and Amazon,” he says. “I couldn't talk her out of it.” So, she found another advisor.
Stockpicking is not his forte; money management is. “If I didn't redefine my business in the late '80s and early '90s, I would still be trying to find the next best stock to buy.”
Firm: Morgan Stanley
City: Oak Brook, Ill.
Years as a rep: 19
Years with current firm: 19
Production: $2.06 million
AUM: $260 million
Mix: 20% cash, 35% bonds, 45% stocks
Specialty: Fee-based management
What a long strange trip it's been: A native of Iran, Sanandaji became one of the early test subjects for Dean Witter's “Socks and Stocks” effort, setting up shop in Chicago-area Sears stores. Now, one of the firm's top 150 producers, he's a member of Morgan's President's Council.
Market volatility pales by comparison to Darius Sanandaji's experiences. A real estate developer in his native Iran, he watched a 1,200-unit housing project he'd financed go to pot after the revolution. He wound up uprooting his family and fleeing to the U.S.
“He had to start from zero,” says Dr. Houshang Farahvar, a surgeon and client of more than 20 years. “He stood on his feet….I introduced [dozens of friends] to Darius. He worked with them in an honest, professional manner.”
Sanandaji puts clients through two- or four-hour workshops on initial consultation, during which he extols the virtues of fee-based management, which now accounts for 70 percent of his business.
“I really disliked charging commissions,” he says, adding that he would have shifted to a fee-based approach in the early 1980s if it were possible. Instead, he held low-cost stocks — some of his accounts still have Microsoft bought at $3. “I want to take care of their needs without them worrying about a conflict of interest,” he says.