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Aggressive Offers Help Indie B-Ds Recruit National Planning Holdings

Aggressive Offers Help Indie B-Ds Recruit National Planning Holdings

00:00 01 October in In the News

by Bruce Kelly and featured in Investment News
October, 2007:

Independent broker-dealers making lucrative and inventive offers to recruits appear to be gaining interest and attracting reps, with two firms saying they have recently found traction with advisers.
In April, the four broker-dealers in Santa Monica, Calif.-based National Planning Holdings Inc.’s network began offering independent-contractor reps and advisers an astounding 42.5% of their previous 12 months’ fees and commissions to join. The offer, which is in the form of a forgivable loan and transition money, ended yesterday.

“It’s been very popular,” said Jim Livingston, chief executive of NPH. “The pipeline is reasonably full.”

Brokers needed to sign a letter of intent by Sept. 30 to qualify for the offer, although the firm expects to make transitions of advisers into December.

GunnAllen Financial Inc. of Tampa, Fla., meanwhile, also began offering new reps and advisers lucrative payout packages at the beginning of August.

The firm continues to offer a variety of deals to attract reps, but the new one is a guarantee of 100% payout on brokerage and advisory accounts that reps open in their first six months at GunnAllen.

After six months, the reps’ payouts on any new accounts will be according to the firm’s standard structure.

So far, more than two dozen reps and advisers have expressed interest in the deal, said David Levine, national sales manager. On average, those advisers have $55 million in assets under management and generated $470,000 in fees and commissions over the previous 12 months.

“There’s no fine print. There’s no catch,” said Mr. Levine, adding that the average assets under management of the prospective reps is “multiples” above that of the firm’s current advisers.

“The response is phenomenal,” he said.

Such deals are a clear benefit to reps and advisers, one industry recruiter noted.

Broker-dealers sometimes claim that they can double reps’ books of business when they join, but that doesn’t always happen, said Jonathan Henschen, president of Henschen & Associates in Marine on St. Croix, Minn. “It’s saying we’re going to put our money where our mouth is,” said Mr. Henschen, who works with GunnAllen but not National Planning Holdings. “It’s an added piece to the puzzle.”

Competition for top reps is fierce, with dozens of firms chasing a limited number of brokers and advisers (InvestmentNews, Sept. 17). While many independent firms have goosed their transition packages to help reps absorb the expense of changing firms, the offers by National Planning Holdings and GunnAllen have been among the most aggressive.

NPH was among the first to offer upfront money in the form of forgivable notes. Wirehouse broker-dealers have typically done such deals to attract reps, while independent firms have not.

GunnAllen, one of the fastest-growing firms earlier in the decade, has recently replaced as many as 350 of its more than 800 reps. That’s because the firm’s rapid growth led to a significant increase in the number of reps in need of heightened supervision on compliance matters.

NPH’s Mr. Livingston declined to comment on the number of reps and advisers the 42.5% deal has attracted.

But the network of four firms — Invest Financial Corp. of Tampa, Investment Centers of America Inc. of Bismarck, N.D., National Planning Corp. of Santa Monica and SII Investments Inc. of Appleton, Wis. — has grown this year despite a change of management in the spring.

At that time, M. Shawn Dreffein, the network’s chief executive, resigned, and much of her top recruiting staff left (InvestmentNews, May 28).

Mr. Livingston said the four firms have slightly more than 2,800 affiliated reps and advisers. According to InvestmentNews’ survey of broker-dealers in January, those four firms reported 2,631 affiliated reps.

National Planning has probably seen the biggest increase, followed by SII, Mr. Livingston said.