Long before he became LPL Financial's chief advocate for advisors, Derek Bruton was no stranger to multitasking-or dealing with unusual circumstances. As a college student at Stanford University, he managed to major in history, minor in organizational behavior and play center on the Pacific 10 college's basketball team.

After graduating, he moved to Japan where he worked as a securities analyst covering emerging markets during the day and played pro basketball at night. "That's the way they do it there," he explains.

Living in Tokyo and riding the trains to work where transit workers push and shove all the passengers into the cars like sardines was an experience in itself. Bruton jokes he was able to read his newspaper on the way to work. The other riders were not.

In that period, Bruton also found himself recommending one of the hottest stocks of the early 1990s, Telmex. But he left Japan in early 1994 to join an independent advisory firm in California and didn't have a chance to pull his buy recommendation.

As managing director, national sales manager for independent advisor services, Bruton finds himself facing challenges that are testing all his multitasking skills to the max. Independent broker-dealers like LPL basically compete against each other for reps in three areas: 1) payouts, 2) technology and back office services and 3) other consultative services that can help independent advisors grow their businesses.

At the nation's largest independent brokerage, Bruton is creating an internal consulting operation to strengthen the firm's value proposition to recruit and retain advisors. In this capacity, his decision to minor in organizational behavior at Stanford may prove to have been propitious. With just under 12,000 advisors at LPL, developing consulting services that appeal to a broad cross-section of them-many of whom are running disparate business models-isn't easy.

Yet LPL has managed to involve advisors in its services to a degree its rivals would envy. Last year was a slow one for financial advisor conferences, yet the firm attracted more than 3,500 advisors to its annual conference, believed to be the industry's largest, and had to rent out the entire San Diego Convention Center. At the same time, LPL is wrestling with some of the same issues as its competitors, like succession planning, or the lack of it, among advisors.

Many advisors may be prospering this year, but Bruton is under no illusion about today's competitive environment, which he describes as downright Darwinian. "It's not the strongest or the most intelligent that survive," he says. "It's those that can adapt to change the best."

Just as clients became more willing to listen to advisors after the 2008 financial crisis, advisors have become more willing to seek out LPL's consulting services in the last 18 months, particularly when it pertains to growing their business. Most advisors are intensely independent and, up through 2007, adopted the attitude that if it's not broke, don't fix it.

LPL can't make an independent advisor embrace a program or service, so Bruton and his colleagues have to figure out what problems are restraining advisors' growth and then suggest solutions. "After the crisis, they are much more open to ideas and they don't want to make mistakes," he says.

In the fall of 2008 as the crisis was unfolding, LPL conceived a new program called Clients First that was unveiled in January 2009. At the time it was launched, management expected 1,700 advisors in the firm's network to adopt it. Eighteen months later, about 7,200 advisors are using the program and 40% of them are very actively using it. Those who are highly engaged are adding new clients at a 23% faster rate than others affiliated with LPL and enjoying 17% higher asset growth.

Clients First created an online platform "to let advisors access a toolset" with lots of communication and marketing tools, according to Ruth Papazian, executive vice president and chief marketing officer. The program zeroed in on specific topics and allowed advisors to target clients with messages based on different client profiles and market segments, including messages that focused on women, retirees, pre-retirees and centers of influence, as well as issues like volatility. At a time when millions of investors were looking for new advisors, LPL created separate vehicles for clients and prospects within the Clients First umbrella.

Presently, the program is in Phase Five and expanding into such areas as using social networking effectively and complying with the murky regulations that surround it. "We track what [advisors] are downloading and so we have an immediate feedback system," Papazian says.
Many advisors have strong sales and relationship management skills, yet marketing is almost a foreign concept. Advisor response to Clients First was such that it spawned another service dubbed Advisors First, housing areas like practice management and marketing.

Advisors First, and Papazian, have their fans. Marc Freedman of Freedman Financial in Peabody, Mass., calls her "one of the best acquisitions LPL has ever made. He praises her "ability to bring things to life by using technology that lots of advisors can access."

Marketing With Commitment
In recent months, Papazian has spent a good chunk of her time holding marketing seminars around the country with LPL-affiliated advisors and trying to convince them to turn it to their advantage. It can be a little perplexing. "Advisors do something that works so well and then they never do it again," she remarks.

With access to 12,000 advisors, however, it gives the firm a huge talent pool from which to seek out best practices. One service the firm tries to help advisors with is client targeting. "We ask advisors ten questions," Papazian says, "and once you start asking them questions, they start to perceive what their best clients look like."

Successful marketing requires a long-term commitment, but does not necessarily require a lot of money in her view. "It's staying with it and understanding it's not a one-hit wonder," she explains. Involvement in community charities, and appearances on local cable and radio shows also can go a long way to reinforcing a firm's credibility.

Papazian has also negotiated an agreement for advisors to access prospecting lists from Walter Karl USA. Her advice when it comes to direct mail is to never send out "more than 1,000 pieces at a time."

When LPL recruits advisors out of wirehouses, they tend to know even less about marketing than independents, and without a national brand behind them, they tend to miss it more. Consequently, Papazian and her staff often spend more time with these folks, creating logos, brochures and overall marketing strategies. Branding an advisor's own firm in her (or his) local market is particularly important for someone who is going independent and used to relying on a national firm.

Business Consulting Is Key
Another area where advisors at LPL have grown increasingly receptive to listening to the home office is business consulting. Given the dramatic decline in revenues many advisors-and many industries-experienced in late 2008 and the first half of 2009, that's not surprising.

"Next to nobody's business is prepared for a 50% decline in revenues," observes Andy Kalbaugh, executive vice president, business consulting for independent advisor services. It forces an advisor "to understand the guardrails and keep expenses under control."

Kalbaugh oversees a staff that has grown from six to 32 business consultants in the last year and is still expanding, with the recent addition of former Associated Securities president Allison Couch. Perhaps the biggest challenge is persuading advisors to strike the right balance between being a good advisor and being a good businessperson.

Some top advisors are succeeding in spite of their lack of focus on the business. Kalbaugh notes that when LPL surveyed 800 top advisors in its network, 40% actually had a written business plan. That figure probably is higher than the average in the profession, and many American entrepreneurs no doubt dismiss written business plans as exercises in bureaucracy.

Be that as it may, the 40% at LPL with written plans are enjoying a 5% higher growth rate than the 60% without one, and Kalbaugh anticipates an attitudinal shift among the skeptics. "I've done this for 20 years and I've never been in an environment where advisors have had a more receptive appetite for ideas," he says. "The crisis will change how people run their businesses for years to come."

What is the average advisor's major set of challenges? Kalbaugh lists three key issues, including driving efficiency into the firm, marketing the business, and growing equity in it. A subset of advisors place too much energy on growing the top line, which ironically may help LPL more than the individual advisor.

"Advisors really care about all their clients and that's where time management comes in," Kalbaugh says. He doesn't advocate that advisors "walk away from clients, [instead just] allocate your staff's time more efficiently."

In today's world where clients expect calls returned in three hours, advisors who are reluctant to delegate soon will find themselves overwhelmed by the Darwinian developments that Bruton cites. "It's a seismic shift in consumer behavior," Kalbaugh says. "If a business doesn't adapt, it's going to get very challenging."

LPL's consulting engagements drill down on the two primary interest groups driving advisors' practices: their clients and their staff. "We take a step back and look at their book of business from an economic standpoint, identifying A, B, C and D clients," Kalbaugh explains. Then they profile A clients, examining their activities, where they socialize and what they have in common with future prospects.

Carole Ford, who runs Ford Financial, a Fresno, Calif.-based wealth management firm with $300 million in assets, learned during the crisis that her firm could "weather almost any storm." Still, it served as a "stress test" for her and her staff and forced them to turn inward and re-examine the business with Susan Porter, an LPL relationship manager. The upshot is that Ford Financial now tries to "capitalize on opportunities that play to our firm's strengths and our client needs, rather than reach for opportunities that are potentially profitable in the short term, but ultimately distract us from our primary focus," Ford says.

In order to grow their businesses, principals in advisory firms need to free up more time to spend with clients and prospects. So the mantra of Bruton, Papazian, Kalbaugh and others is "delegate, eliminate and automate."

"Business owners have only so many levers they can pull to drive profitability," Kalbaugh maintains. "Labor and real estate comprise the majority of your business expenses, so focus on [staff] productivity."

One way to improve productivity is to clarify goals and shift compensation to variable comp and align it with the firm's goals. "Having the ability to reinvest in your firm" is critical, Kalbaugh says. "The more robust your practice, the easier to adjust your infrastructure and take care of clients while still growing." It's also one reason his team of business consultants sits down with advisors right after they move to LPL, and occasionally before they do.

Importance Of Succession Plans
If LPL's team of business and marketing consultants finds a receptive audience among advisors for most of their services, there is an elephant in the living room that Kalbaugh calls "alarming." It's called succession planning.

Procrastination, coupled with an aversion to facing up to one's own mortality, are driving forces behind this gaping hole in so many advisors' own personal financial plans. That said, it's a major challenge, not just for the entire independent advisor business, but also for the vast majority of the five million small businesses in America.

Speaking at the Financial Services Institute conference last January, Bruton discussed this thorny problem with other broker-dealer executives and cited an industrywide survey LPL conducted with FP Transitions. The survey found that 4% of advisors in the U.S. have done a valuation and only 10% have created a formal succession plan. "With the fall in the housing market, their firm is the biggest asset for many advisors," he says.
Surveys of small business owners across all industries yield similar results, so it's an issue advisors frequently face with clients.

Bruton also believes that succession strategies ideally should entail planning today for retirement in 20 years. Advisors need to start asking themselves serious questions long before they start thinking about succession, much less a sale or merger. All too often, Bruton notes that advisors wait until they get ill or die or some other event forces them into retirement, and then the firm the advisor has spent a lifetime building gets sold at a bargain-basement price.

"Every year we see a few tragedies," Kalbaugh says. Advisors spend a "ton of time taking care of their clients. One of the best ways to take care of them is through a succession plan. "

To address this problem, LPL entered a partnership with FP Transitions that allows advisors to do quarterly valuations. Performing a valuation for the first time can expose a big gap between perception and reality. "Sometimes the valuation is a rude awakening," Kalbaugh says, adding that once an advisor knows what factors determine a valuation he or she can address the weaknesses.

A Mosaic Of Information
At the end of the day, most clients go to advisors for help with their investments. At the same time, the advisors who team up with LPL don't have to use its research. And its research team thinks that this freedom might just be a virtue.

The world we knew two years ago, when the centralized decisions of Wall Street could bring financial chaos, has created skepticism among advisors on the ground, maybe even toward their own firms' investment ideas. Yet LPL maintains the meltdown has presented it with an opportunity to show that it, too, was independent all along-that when Wall Street imploded, the firm was outside the blast radius, living off the fat of its own independent investment research. And since LPL's advisors know they don't have to listen to the company, ironically, that means they might actually listen, says Burt White, the firm's managing director of research and its chief investment officer.

"We have advisors from Green Berets to GI Joe," he says, "And they completely run the spectrum of how they utilize our research group. So what they maybe do is call up and say, 'I have my own particular idea or bias and I'd like a little help on selecting a particular mutual fund or a particular asset allocation,' or 'I want to know your view on China.'"

White says that LPL's approach is not to enforce lockstep conformity with the research staff's company line, which might happen at the wirehouses, but instead to create a mosaic of information in which the company's research is used alongside that of other companies such as a Morningstar or an S&P.

That very freedom, but also the need for help, has inspired advisor Debra Taylor, the founder of Taylor Financial Group in Franklin Lakes, N.J., who says her firm has increased its reliance on LPL's research over the past 18 months.

"We review research from a number of sources, including Morningstar, Zacks, Standard & Poor's, Thomson/Reuters, and a variety of Web sites and trade publications, as well," Taylor says. "We will conduct our own research when necessary to either seek further confirmation of [LPL's] research department's recommendations or to address a very specific need on behalf of a client-for example, New Jersey municipal bonds."  

She says that not only does her firm rely on the research department's recommendations when discussing specific items with clients (such as whether she likes gold), but she has also put more than 90% of her clients' assets into the research department's centrally managed platforms.
The firm has five platforms, says John Moninger, executive vice president for advisory and brokerage consulting services. Two of these platforms offer complete advisor control and three are centrally managed. Moninger says advisors of all sorts of sophistication levels use both types, depending on the nature of the work they're trying to do and how efficiently they're trying to do it.

Being relevant to advisors with the investment research means being ahead of the curve and proactive when the market is having tantrums. One such cataclysm was the recent 1,000-point drop in the Dow Jones index on May 6, a slide attributable to either fiscal problems in Greece or computer flubs on Wall Street, a land with more modern problems. White says LPL issued a blog in the middle of the market dislocation and a high volume advisor call-in at 4 p.m. for a market close discussion to talk about what happened. (He says the firm blogs eight to ten times a day and sends out a client letter every two weeks.) LPL followed up the next day with its regular 8:45 a.m. morning call, and again the volume was large, White says, and there was an 11 a.m. update as well.

"Obviously [the clients] were nervous," he says about the market drop. "What we said was that this was an aftershock. This is an effect of the financial crisis that we've been in and not something new. We've got a whole lot of casualties because of this recession. So this isn't a new event, this is a casualty of the financial crisis we've been in. This is an effect and not a cause."

A Big Team
Freedman, the Massachusetts advisor, notes that LPL today is a very different firm from the small independent brokerage it was when he started in the business in 1991. "Back then, the chairman's [founder Todd Robinson] roundtable really met at a roundtable," he recalls.

When CEO Mark Casady holds the roundtable meeting today, thousands of advisors attend. So when the firm holds its annual conference these days, Freedman brings most of his six staffers so they can meet their contacts at the home office face to face and exchange business cards. "Everyone has their own extension," he notes. "What they've done really well is to build out the depth of the staff."