General Electric is one of the best-known brand names in the world, and the representatives of its tiny business unit in the advisory space, broker-dealer Terra Securities Corp. and sister RIA Terra Financial Planning Group Ltd., found that gave them a certain cachet with clients. But when the house that Jack Welch built spun-off its GE Financial and GE Mortgage segments in May, Terra's nationwide force of 2,200, most of whom are CPAs, enrolled agents and other tax professionals, suddenly fronted a new entity that, at least initially, was rather faceless.
The divested businesses now go by Genworth Financial-hardly a household name, although after the firm spends an expected $30 million on brand-creation advertising, perhaps it will be. Still, the recent spin-off is merely the latest in a long history of metamorphoses for the Schaumburg, Ill.-based brokerage.
For the beginning of the tale, you have to flash back to the dawn of the 1980s. Remember 20% interest rates? Picture the plight of two commercial realtors.
Even in the prosperous western suburbs of the Windy City, the commercial-property business was the pits. "That was the impetus that led us to explore selling other investments," says Terra founder and president David Reedy. He and his business partner at the time reasoned that they had investment clients. Why not try to put them in something besides commercial real estate?
"So we looked at the independent broker-dealers we could potentially affiliate with," Reedy says, "but they all seemed like snake-oil salesmen. They were syndicating oil wells, diamonds, guns, movies-partnerships in anything that could create a tax loss. We didn't care much for that, so we started a $5,000 broker-dealer registration with the NASD, anticipating that we would be the only reps." The name Terra-Latin for earth, or land-was chosen as a symbolic link to their days in real estate.
Over the next several years, Reedy earned the CFP designation and developed a viable financial planning practice along with a handful of business partners. Then came a compromise between the American Institute of Certified Public Accountants and the Federal Trade Commission-spurred by the feds' investigation of certain AICPA policies-opening the door for public accountants to accept commissions and fees.
Suddenly they could make money doing financial planning, and Reedy knew plenty of independent accountants. He had called on them in his real estate career.
Reedy walked back into those same accounting offices as chief of Terra Securities, and instead of asking for client referrals, he says, "I suggested that they get licensed with us so we could work together. One day, someone said, 'Sounds like a good idea.' He became our first rep and is one to this day."
Adds Norm Mindel, an early Terra principal who is currently executive vice president: "Our model made the accountant the front-line planner so that he could maintain and control the client relationships. Accountants don't want to refer out their client base just to share fees."
Keys To Success In Courting Accountants
As the brokerage worked with a growing number of thriving tax practitioners, several lessons emerged. First, veteran accountants are ideal candidates for financial planning. Not only do they have literally hundreds of clients to solicit, they frequently are analytical nerds who already know the tax side.