Recruiting at independent broker-dealers is roaring along.

What Long Island planner Doug Flynn wanted during his days at his former wirehouse was to serve his increasingly affluent clients and grow a business. "The problem was I kept hitting my head on the firm's ceiling," says Flynn, an advisor for more than a decade.

Executives at the wirehouse, he says, would have meetings to schedule meetings, didn't offer the full universe of products he needed and didn't offer a model that allowed him to build business equity for all of his long hours. "Even though I was an independent contractor and paid my overhead, the clients and business were theirs. They'd hand your clients out in a heartbeat if you left."

Flynn decided that he was already accepting the risks. Now he wanted the rewards of being able to build a going concern that he owned. He interviewed several broker-dealers before signing up with Linsco/Private Ledger (LPL), jointly headquartered in Boston and San Diego.

Today Flynn, 36, who with a partner created Flynn Zito Capital Management in Garden City, N.Y., is bringing on a CPA who is interested in transitioning his tax planning business into a full-scope financial planning practice. "They never would have let me do this at a wirehouse," says Flynn, who has doubled his income since joining LPL and had his best year ever in 2002.

Independent broker-dealers are looking for more Flynns, and they're finding them at wirehouses and insurance broker-dealers across the country. In fact, the number of planners who are making the leap to independence is climbing steadily, increasing 37% between 1999 and 2002 to more than 95,000 planners, according to Boston-based Cerulli Associates. Meanwhile, employment of reps at the top wirehouses is off by some 6% in the same period, the firm found.

The lure of freedom, business equity and higher payouts has a notable number of brokers with more mature practices making the leap to independence. Many, in effect, have been running their own businesses for years and now want to do it away from the production quotas, control and product-of-the-week pressures some traditional broker-dealer relationships foist on them. "More than 60% of our new recruits are joining us from wirehouses, and the other 40% from other independent firms or insurance-based broker-dealers," says Bill McGovern, senior vice president of business development at Raymond James Financial Services. The remaining 5% of recruits come from banks.

The firm has 3,650 producing reps generating annual sales of $60 million to $65 million, McGovern says, and last year opened 140 new branch offices for a total of 2,000 offices nationwide."Some people are motivated by the thought that they can get paid a little more," says the veteran brokerage executive. Independent firms can make payouts of 70% to 95%, compared with Wall Street's more typical 40% to 60%. "But a decision to go independent is usually far more driven by the desire of a rep to take control of their business and life. A lot of people who talk to us focus on the money initially, but it becomes clear early on they want to build a business they can control," says McGovern.

That doesn't mean that independent broker-dealers are refuges for tired and underperforming brokers. Broker-dealers across the country say they have plans underway to weed out weak planners and replace them with more efficient producers. McGovern says he requires planners to have at least $175,000 in annual production to qualify for their own shop. "We have been actively pushing some people out," he says.

Securities America in Omaha, Neb., which has 1,455 reps, last year brought on 350 new planners and lost about 250 to attrition, says Clint Flint, vice president of branch office development. "The interesting piece of that is the average producer going out at Securities America has about $25,000 in production, while the average producer coming in has about $100,000," says Flint. "We're seeing people wash out and choose a different career path."

Securities America's big recruitment numbers are coming from insurance-owned broker dealers. "I think the sales process at firms is built more around selling the company's products, which isn't always a good fit for folks who are growing a practice," says Flint. "We're finding the people who come on want choice, access to efficient, scalable technology, and practice management and business development tools. They also want the option of using a consultative fee-based approach for delivering services, and that doesn't always exist at their current broker-dealer."

Going after bigger players takes innovation, and Securities America, like the bulk of the independent firms, hasn't shied away from the demands of the successful business people they're recruiting. To bring on San Diego-based planner Raymond J. Luccia, author of Buckets of Money (Braintrust Publishing) and a nationally syndicated weekly radio host, Flint promised to help him create a national network of planners. Luccia wanted planners who could respond to local radio callers' questions and convert them to clients. So far, the company has helped Luccia find three seasoned CFP-certified planners in Alabama and Louisiana who are willing to share revenues, something he could never have done at a wirehouse.

"Luccia needed recruitment, structure and distribution for a national network, so we gave him a firm commitment and are helping him roll out the program," Flint says. "We just brought on another large firm, and the deciding factor for them was our branch expansion network. They want a broker-dealer that can support their aggressive growth plans."

To help qualified firms grow, shops are assigned a dedicated company recruiter and are profiled in a national database. Securities America also helps them create a recruiting brochure and subsidizes their advertising. The program, which was rolled out in early summer, has placed 10 reps and has 30 more in the pipeline, Flint says.

AIG Advisor Group has been doing some innovation of its own to attract planners to the six independent broker-dealers that operate under its umbrella. "We recruited over 1,200 people last year for a total of 9,000 reps," says David Fischer, the firm's national recruiting director, based in San Diego.

Compared with last year, the firm has doubled the number of reps it is signing from wirehouses and regional stock brokerage firms and is still seeing many reps come from insurance-affiliated broker-dealers, Fisher says. But it is also getting choosier. The minimum production for setting up a branch is now $250,000.

To help excite those folks who need a little extra enticement, AIG rolled out a Transition Suite in San Diego, with plans to open a second one in New York City later this year. "It's easy to convince people we're the model and company they want to work with, but actually getting them to take the next step, leasing office space and setting up staff, is a high hurdle," Fischer says. To ease that transition, AIG created an office suite in San Diego that allows reps to begin building their business over a 12-month period without the headaches of finding space or administration as they start up. "We kicked it off this March and have six reps building their firms there now. It's creating a bit of a buzz," Fischer says.

As planners move upstream, so do firms, as they choose who they want to recruit.

"The wooing process is a two-way street. They're evaluating us, and we're simultaneously evaluating them," says Andrew Daniels, director of field development for Commonwealth. "We're not only empowered to find people who we think are good fits, we're expected to do it," he says. "Challenging, demanding and nice" are the first words that come to Daniels' mind to describe good recruits. The company also has an affinity for those who take a needs-based approach to planning. In the past four years, Commonwealth has raised its production minimum to $100,000 per year from $25,000. "We want to keep our hands on the pulse of our services levels to ensure the seams aren't stretching, but at the same time we need to keep upping the ante," Daniels says. The firm has 825 reps, up from 780 last year. "We've had a lot of $10,000 and $20,000 reps move on, and have replaced them with higher-producing folks," he adds. "But we also had our best recruiting and highest gross revenue year ever in 2002, so, given the economy, we're extremely pleased."

At LPL, the firm is also choosy, even going so far as to develop an official "scorecard" (available from the firm's Web site www.trueindependence.com) allowing planners in the market for an independent broker-dealer to rate firms in terms of support and technology. "Of course, we hope we're the firm that comes out ahead," says Bill Dwyer, LPL's executive director of branch development.

The firm, which has 4,700 reps and 2,200 branches, grew at a 10% clip last year and is on track to do the same again this year-the firm's target, Dwyer says. Planners need to have $125,000 in production to open a branch with LPL, though the firm's sweet spot is $250,000 to $500,000.

"It's a thin-margin business, and we pay out a big percentage," Dwyer says. "The more a rep does or wants to do, the more we participate. What we really focus on is looking for reps with eight to ten years in a successful, relationship-oriented business. We really like to see longevity and client retention."