But firms, like their reps, are forced to add new services to compete.

As the entire financial services industry struggles with an unsteady market and economy, broker-dealers find themselves in the same plight as many of their reps. They are being asked to do more, at a time when they have smaller profits to reinvest in their firms.

With revenues generally down, broker-dealers are facing a marketplace where the name of the game is service-providing the personal touch to differentiate yourself from the competition. Just as their reps, broker-dealers are being forced to transition from a volume-based to a service-based mentality. And they're finding it isn't always easy, observers say. "Their challenge is to find ways in which to attract and retain reps to their business," says Mark Tibergien, a consultant with Moss Adams LLP in Seattle.

"This is a challenge because in this environment, they are experiencing true margin squeeze. The cost of technology continues to go up. The productivity of their independent reps is going down. At the same time, the reps continue to say, 'I need your help.'"

Making things even harder for broker-dealers is that even during good times, their margins are perilously thin, he adds. "The average payout for broker-dealers is 82%," Tibergien says. "That means for every dollar that is brought in, 18 cents is left over."

It's a situation that has thrown the business into a state of flux, where players are shifting strategies, trying to find niches or buying up and absorbing smaller operators to achieve economies of scale. For some broker-dealers, all the activity has stirred up opportunities for growth. Joseph Deitch, chairman and CEO of Commonwealth Financial Network, says consolidation in the industry has made for a ripe recruitment environment.

"A lot of brokers are in some unpleasant situations and they want relief," Deitch says. "If a broker-dealer is cutting back on services or changing ownership and getting weird, then people start to say, 'What else is out there?'"

Deitch says one of the reasons Commonwealth will see an 8% increase in gross revenues in 2002 is that it has been expanding services rather than cutting back. The company, for example, has about 225 staff and 750 reps-a ratio the broker-dealer feels is among the highest in the industry.

The company has also invested in technology, providing tools for advisors to automate various office functions, and put emphasis on developing training programs. Commonwealth has consultants who provide advisors with help in practice management, business strategy, sales and marketing, among other areas, says Andrew Daniels, Commonwealth's director of field development. "We, frankly, are on the same side of the fence as they are," Daniels says. "We appreciate that we make more money when they're more efficient."

The nation's largest independent brokerages have tried to leverage their resources during the bear market and recruit more reps. "Early in the bear market [in 2000], people didn't want to move," says Dick Averitt, president of Raymond James Financial Services.

But 2002 turned out to be the best recruiting year in the firm's history, as it added 160 new offices and now has a network of 3,800 advisors actively working with clients. Interestingly, a big chunk of that growth comes from the firm's existing offices, as many have engaged in their own recruiting efforts. The bear market has produced a survival-of-the-fittest phenomenon and some younger professionals have been particularly taxed. More experienced advisors are more adept at turning the miserable environment to their advantage. "If you are new to the business, your eyes are like saucers," Averitt notes.

First « 1 2 3 » Next