Heading out Indy from support staff

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Nov 28, 2007 4:49 pm

I hope this may be a bit of a different theme than normal in that I am currently a staff member that supports a group of advisors that are in the midst of looking at going independent from a wirehouse.  We are a group of 4 advisors and 2 staff, of which I am one.  A few months back, we were all so frustrated with events in our branch and with our firm that many of us were looking at alternatives; I was even looking at going into production for the first time, being licensed currently, this was both appealing and nerve racking.  Anyway, we are on the back end of our process and I was hoping to spend a few days sharing our experiences, thoughts on the firms we visited and to solicit comments on those thoughts and see if I can maybe gather a few answers and experiences to our questions.

First, we did spend some lengthy time reviewing the various kits of information and reviewing websites, trade magazines, talking with friends that were independent etc. and we decided to look at several firms in depth across a couple different sizes.   We decided to look at the following firms in depth:  LPL (surprise), Commonwealth, First Allied, NEXT Financial, Security Services, and NPC.  We did pass on, after doing some research, Raymond James, Wachovia - for obvious reasons to us, FSC, and VSR. The ones we looked at in depth we spent a great deal talking with various folks at these firms from recruiters, department heads and executives, home office visits, etc. and wow is it a tiring experience.    Well, I will add more over the next few days on what we saw, felt and decided on but would love to hear thoughts on this so far from anyone out there.  
Nov 28, 2007 4:51 pm

Are you at a wirehouse right now?

Nov 28, 2007 4:57 pm

We still are but are enroute to being independent - about 2 weeks away.

Nov 28, 2007 5:22 pm

Good Luck, I’m at LPL

Nov 28, 2007 8:47 pm

Sounds like you have really done your homework. Just be careful with an entire team jumping ship en masse. Your firm is going to be all over those clients (and likely doing some quick TRO work). I am assuming you have between $100-400mm in assets looking to move. Not small potatoes to any firm.

Nov 28, 2007 9:13 pm

Well, I know which one I chose when I went, but I'm curious as to which your team ultimately decided to affiliate with.  I'm also curious as to why Raymond James was ruled out.  When I looked at them, they were a close second for me.  Now, not so much, but for reasons that became apparent well after I made a decision to make the leap.

I'm taking it you are at AGE and that is why Wachovia was eliminated.  Some other things you'll hopefully reveal as time allows...approximate team production, product mix, and why the "winner" won.  If I were you, though, I would keep a lid on the rest of these details until the leap is made, as the element of surprise is critical to success and some sharp-eyed loyalist might put two and two together based on the clues you've already left us (you may even wish to edit your post, leaving some of the more telling details, such as numbers on your team, firm affiliation, etc.  I'll likewise edit my post assuming you do).

Good luck to you and your team.  Independence is an exciting, rewarding, frustrating thing.  I have no regrets and can only recall one poster here wishing they could go back to indentured servitude.
Nov 29, 2007 9:49 am

I’ll echo the comments from both Broker24 and Indyone.

You have many issues to process, but perhaps the key one right now as you are on the verge of a move is legal.  It may not be logical or fair, but if you misstep you could see all your hard work go down the drain. 

So be very careful right now.  Plenty of time after your jump to share experiences here - something I look forward to hearing about, BTW.

In particular, make sure your team is getting legal advice on employment law and exit strategies (and NOT simply a lawyer from your new B/D.  You need a lawyer hired by your team to represent ONLY your interests).  That will be critical to a team departure. 

You can count on being hit with a TRO or injunction.  Whenever a group goes together, especially with support staff, they will call it raiding.  Be prepared for that or you will be in trouble.  Once prepared with good legal counsel, hold your breath and jump!

Nov 29, 2007 3:51 pm

I appreciate the early feedback.  We have been meeting and working with our own attorney(s) from the beginning and though I am not the expert, we seem to all feel pretty comfortable having our ducks in a row and being prepared both for our workload and the actions of our firm upon our departure.  I also want to thank Indy and Morph for the recommendations of being careful, I may have said something I would have regretted had you two not emphasized this.

Given that and where we are in our process I will just leave details on what our experiences were in talking and  meeting with various firms.  I will say on the firms we decided to not pursue with greater investigations were of several reasons. For Wachovia, what may seem obvious, caution as your suspicions may or may not be accurate.  What was really the situation more for the advisors with Wachovia was at the end of the day they were bank owned.  Given the various frustrations, reasons for etc. that we are leaving for, the FAs didn't feel comfortable going that route.  Raymond James was a different story as some of us wanted to look harder, I was one of them, but the majority ruled elsewhere.  Many of the issues that were of concern was we know of and talked with several reps that we know of that left them over the last year or so.  Many had kinds words but the common theme was the independent feel left them and those who voted no did so for similar reasons as they did for Wachovia.  I liked them though because of the resources and service they seemed to offer and promote, for what I do in this group, that was appealing to me.  VSR was also a difficult choice for us.  In the end we deemed them in the same group (size) as a couple of the firms we were going to pursue and that they really didn't differentiate themselves from them.  In fact, they were far short in comparable payout and some costs but on the positives, they were certainly high touch type firm - which we found more appealing as we moved through the process. FSC - We just never really seemed to get straight things from them in our initial inquires with them.  It was sort of odd.  One of the FAs also was very keen on an issue that they unwittingly made us aware of in that they are not really growing overall like they suggest.  What the FA was alerted too was their recruiting numbers year over year that they were claiming underscored a concern for us in that their overall rep force/size was not keeping pace.  So as the FA was telling us they might recruit say 200 reps, but their total rep force from the previous year to the current year etc. would show a net gain of say 60.   What the FA was alluding too obviously was that they seemed to be losing as many reps as they were recruiting which alerted us to having some issues behind the scenes. Even as I type this it's amazing seeing how educating this experience was......
Nov 29, 2007 4:57 pm

For what its worth regarding RayJay, I talked with an advisor recently who was relocating his book to another Indy.  He felt his independence slipping away with RayJay and was also having a tremendous amount of problems with backoffice support.  He said its just been in the last yr or so that he’s noticed a change. 

Interested in your findings about LPL. 
Nov 29, 2007 5:18 pm

For what its worth regarding RayJay, I talked with an advisor recently who was relocating his book to another Indy.  He felt his independence slipping away with RayJay and was also having a tremendous amount of problems with backoffice support.  He said its just been in the last yr or so that he’s noticed a change.

  I think it started with that incredibly S-T-U-P-I-D move changing VA comp.  That was a money grab on RayJay's part and had I made the move there, I would have been hopping mad about an "independent" firm making a unilateral decision that had a materially negative impact to my gross revenue.  It hasn't been all that long ago that one of the top dogs at RJ acknowledged in Investment News that mistakes were the VA move that cost RayJay numbers.   You'd think the bankers had moved in...
Nov 30, 2007 4:39 pm

Well one of the first firms we worked with and had some of us visit etc. was NEXT Financial.  Discussing our experience with them should probably be it’s own thread.  Has anybody else ever talked with them because I would certainly like their feedback on how their discussions went.  Anyway, most of us as we talked, reviewed notes, etc on NEXT shook our heads and crossed it out quickly.

We were drawn to them (I should say the advisors were) because of the awards of Broker/Dealer of the Year, which they won for several years in a row, the idea of the representatives owning the firm and having an apparent role it the managing of it.  As we began discussions and gathered materials and reviewed websites and all, questions started to come up. 
How are checks handled from clients?  How quickly are funds available to conduct business with our clients?  How are funds paid to you by the vendors and what is the length of time it takes to hit our pay checks? What branding can we use both for our firm and on our cards? What professional development is available?  What about the department leaders of the firm, what experience do they have and what level of expertise can we expect in working with our clients? What turnover do you see in your FAs and backoffice?  How does NEXT support us for trust business and on issues like estate/financial planning, corporate executives and concentrated stock planning, etc.  as we have a large amount of clients that need these services. What about your technology and how does it allow us to operate more efficiently than firm a, b, c, etc? How do we communicate with the back office, with who, how are incidents followed and what type of follow up can be expected? (These were typical questions that were asked of all the firms we looked at).    In a single sentence I think it would be fair to say, many answers were like no answers!  It seemed to take an awful long time to have many of these questions addressed if at all.  Their technology compared to the others (most of them atleast) was ancient.  There was not a system of single sign on for most, it was very fragmented and also very repititive which was a great concern for me and my counterpart.  When also never really got any straight word on assistance with learning their system.  One of the FAs was befuddled by their answer on the turnover, when it was asked relating to the FAs, we were told something to the affect of we only lose about 2% of the reps we want to lose" which made him wonder how many reps are you losing that you do want to lose and why?  That never got answered, nor did the question of turnover in their back office which led us to believe it's probably higher than most. One of the bigger sore spots for me was relating to the timing of client checks to hit accounts and our FAs ability to begin using those funds was something to the effect of 10 days.  What we discovered was that they seem to use traditional mail for most of that and not the EFT process; but I guess to their defense they claim it was due to Pershing.  We asked about using local bank programs to speed that process but I guess Pershing doesn't allow that or can't support it because they were not very open to this.  I just was real concerned with service issues that that would create for our clients and eventual headaches for our FAs.  The same situation occurs with the processing of commissions too.  We have a fairly mix book (I will leave it at that) and NEXT explained that the vendors pay is not typically set up to be done by ETF or ACH, but by mail as well.  I can't imagine how often checks get lost and how it's tracked with traditional mail, we have occassional issues now with in our set up which is not by mail.  This led to more concerns on our part when communicating with the back office.  There was no sense of flow or order as to who we needed to call for specific issues or how we would be trained in the transition.  We were told about a 24 hour response mandate and when we asked how does this get enforced or how are inquiries and issues tracked they couldn't answer it and merely glossed over that.  I was very concerned with this as I am at the center of client and FA relations and typically am the one dealing with the back office.  This troubled me greatly. The FAs had some real hangups with the level of expertise available there too.  Given our client base, at least a good portion of them, there was a great lack of experts available to support us there.  We were on our own when it came to estate and trust support (told about good vendor relationships), not a whole lot of internal support dealing with corporate executives either.  One of the FAs was stunned that they really didn't have anybody to address these concerns. On the positives, sort of, was the ownership.  The FAs were encouraged by this and were offered some form of options but given their other reservations, didn't feel it overcame them. The 4 FAs did not all go to the visit, but most of us in various degrees sat in on calls, etc. and all came to the same conclusion that NEXT just is not a strong firm to support us.  There was a very strong push they seemed to think on things that didn't pertain to them like coaching programs and certain types of fee business that they are offering. Another couple issues we had was on the branding; I wouldn't be able to call them FAs anymore I guess unless we had an IAR or RIA.  And we couldn't use the DBA we wanted to either.
Dec 3, 2007 4:38 pm

Securities Service Network was the next one on our list and we collectively were much more impressed with them over all than we were with NEXT but that may have been the case with whoever we looked at after NEXT. 

Pretty open platform for fee options, outside managers and establishing an RIA (although I believe we would have needed to use Fidelity v having other options).  Their technology was also much better at least more streamline in processing things and providing us with client and business information.  They also had some various, though most were minor, restrictions on what technology we could use. They were also on the higher end in payouts with some platforms in the 100% range.  The folks there were also pretty engaging and well read on their responsibilities which was a great improvement from our visit at NEXT.   The down side of what we found however was that there was an awful lot of nickel/dime and higher fees than what other firms were offering.  We had to really examine what we were gaining gross/net v the cost to receive and level of services provided.  They were quite thin in the back office and our concern was certainly on the response time of and level of service we might receive there.  We spoke with several reps and staff on this and seemed to be on to something based on their feedback.  Overall though we were going to keep them in mind and see how the others looked. 
Given the first two visits, we started to wonder if the stories about after all expenses etc when indy, you end up about the same as you do at the wirehouse.  We were sort of seeing this picture painted.  Though with SSN it was several percentage points higher based on our initial numbers and compared with NEXT, but we were beginning to wonder if we might have to add staff to the company to make up for some of the deficiencies we were finding so those number may not have been accurate.  Regardless, we did walk away from our experience with SSN in better spirits and as if we were making the right choice which was not the case after NEXT.  We maintained contact with SSN for the time but eventually ruled them out as the concerns we had addressed them selves with pretty much all the remaining firms we were going to look at.
Dec 4, 2007 1:54 pm

That’s hilarious about your experiences thus far…shows how far away some are from others in the indy arena.   Sounds like you had a big eye opener with NEXT.

Dec 4, 2007 5:24 pm

CS - it was a real scary eye opener at first.  I mean we spent a lot of time really questioning whether we could or should go independent because of our experience looking at NEXT.  The FAs were so put off by what they saw, heard, and everything in between that I was looking at other options away from my current job.  There seemed to be an awful level of incompetence from that firm.

But it got much better for us after the first visit and even more so after SSN.  We were on our merry go round tour of California based firms with LPL, Commonwealth, First Allied and NPC to be viewed.  We went to NPC next and found the beginning of the promise land there in that we saw many strong pluses in what we were hoping for in being independent.  Great technology, great service model, strong home office staff and reputation; they seemed to be on their game when it came to knowing what we were looking for, who we would be talking with and specifically and most importantly for me, they eached seemed to have a strong handle on their roles and responsibilities.  Certainly far greater than the NEXT and a bit more than SSN.  The also were well staffed. Their recruiter that we dealt with was a bit inexperienced but was quite on the ball getting us the information we needed and given the way the concerns, questions and issues were addressed we were comfortable with them. 
One set of concerns we did have was the turnover in their executive and branch development departments.  FAs concerns were what the culture will shape into with a new leader.  Not sure if what we experienced will be the same a year or two down the road because of the new leadership.  We had NPC at the top now and were walking away ever more confident in our decision.   I am very curious to hear now what experiences if any that some of you have had with the firms we talked with to this point - NEXT, SSN and now NPC.   Thanks
Jan 3, 2008 2:58 pm

Well we made our jump and wow what a busy time it has been for all of us during December.  Lots of paperwork and learning and getting organized and you name it.  We rotated long shifts through out the last 4 weeks and gave some time off through the holidays but I am exhausted yet still excited.  Over the past month we have or are waiting on the ACAT to complete all of our “A” clients minus 2.  We are well on our way with the “B” clients at this point too.  One of the harder parts of this has been mapping and moving fee platform acounts to the new firm, but the advisors are handling most of that, it has eaten alot of phone time and help with our new b/d though which they have been phenominal thus far.

And yes, we ended up going to Commonwealth over LPL and First Allied.  All 3 were exceptional and none of us had any really negative concerns on them, in the end, we just got real comfortable with the personal touch and support Commonwealth offered v the others but all 3 were just excellent in all of our minds.  I don't know if I can spend the time to discuss each but needless to say, it was a difficult choice, it never came down to money or us v them type of arguments it was just each firm was highly professional, offered tremendous service and support, and then some.  In the end we chose Commonwealth. It is amazing to see the different levels of each firm we visited or talked with.  I walked away very surprised at how different some independent b/d can be from the other and when you read various posts or talk with recruiters, advisors etc at all these firms, it is amazing when you put your investigative hat on how much you find is true v bs. Having said that, I am confident that we found 3 firms that were above the others in integrity, professionalism, and living up to their promises and their ability to deliver on servicing us and our clients.  Likewise, I think we all felt confident that we found several firms that just didn't match up to that level.  In our minds we felt strongly that SSN, somewhat on NPC, and absolutely NEXT Financial were firms that were more fluff than anything.  Some firms like NEXT we felt like we were being sold a used car by some slick salesman, while at Commonwealth and LPL we felt like we were being presented opportunities to better our business and our clients lives by what they offered.  Such a wide range of what is out there, I guess my advice to those who look to be thorough, patient and very cautious in your process.  Don't jump at the first one you look at, continue to seek answers and make sure you know and understand what is being offered v what can be delivered!   BTW, we left Ameriprise.
Jan 10, 2008 1:54 pm

I was wondering if you can share the questions that you asked and the things that you use to consider the firms and your choices.

  I'm looking at changing firms and it's been difficult pinning down things to see what the differences are.    I really like some of the questions you listed such as funds availability.  That was one that I didn't think of. 
Jan 31, 2008 11:05 am
Boy are we glad we avoided this company!   Shore stock broker barred from industry
January 29, 2008 12:00 PM
View Full Story
A Shrewsbury stock broker has been barred from the securities industry after about a dozen of his customers from New York to Florida said they lost millions of dollars on risky trades that he made.

Gregory A. Horton, a stock broker with Next Financial Group Inc. in Shrewsbury and Raymond James Financial Services Inc. in Monmouth Beach, also made trades solely to increase his commission, according to many of the complaints.

Huge declines in investment portfolios happen "when there is a wildly reckless trading strategy," said Jeffrey B. Kaplan, a Miami attorney who represents one of Horton's clients, a fast-food manager who lost most of her life savings. "You can't underperform the market that way if you put together a prudent plan."

Horton's registration was revoked under the terms of an agreement approved earlier this month by the Financial Industry Regulatory Authority, the regulatory body of the securities industry. It means he can no longer sell securities unless he is reinstated.

Horton is the subject of at least 13 customer disputes that either have been resolved or are pending, according to the authority. The disputes date to 2003 and range in value from $9,600 to millions.

The phone number for Horton's house in Monmouth Beach was disconnected, and he couldn't be reached for comment. A spokesperson for Houston-based Next Financial Group didn't return a call for comment.

In one case that now is in arbitration, Kaplan said Next Financial Group failed to supervise Horton and the investments he made on behalf of Barbara L. Hock, a resident of Lake Worth, Fla., who worked as a manager at Wendy's.

According to the complaint, Hock gave $150,000 to Horton to invest in April 2004, shortly after her husband died. That amount included $70,000 from proceeds from a life insurance policy.

Kaplan said some of the investments made by Horton were too risky. Others were highly concentrated in one stock; at the end of November 2004, her account was worth $108,831, and 80 percent was invested in Lucent Technologies Inc., according to the complaint.

The complaint alleges Horton also frequently bought and sold securities with no reasonable explanation except to pile up commissions in a technique known as "churning."

Eventually, Hock lost 87 percent of her money. By comparison, the Standard & Poor's 500 index rose by 11 percent during the same time, Kaplan said.
Jan 31, 2008 1:56 pm

Don’t paint with too broad a brush.  Just about every b/d’er has, or will, find themselves in trouble because of the unethical actions of one of their reps.  While they will also bear some responsibility - and punishment - for failure to supervise a rogue rep, they certainly cannot be faulted to the same degree as the rogue rep. 

Not saying I love Next or RayJay, but if you place blame for this at their doorstep, no b/d’er will pass your test.

Jan 31, 2008 5:56 pm

I know that’s the case, my point in bringing this up goes hand in hand with what our experience was when looking at them.  It just seems to prove what our experience was.

Feb 1, 2008 1:07 pm

How was the broker with both NEXT and RayJay?

But more importantly, thank you Scarlet for the series. Also, how well does Commonwealth handle Cash Management (i.e. Money Market, CD, Checking)?