Here's how Capital Analysts caters to nearly 500 financial advisors.

Bob Cogan probably isn't the world's best dancer.

In fact, a few of the advisors who work with Capital Analysts Inc., the broker-dealer Cogan runs, saw him dance to a golden oldies rock band at a recent sales conference. They say the veteran brokerage executive should stick to running the company and leave the dance floor to the more fleet of foot. They're only half joking, but that's OK with Cogan, since running a broker-dealer is something he does pretty well.

With 29 years under his belt at Capital Analysts, based in Radnor, Pa., he's got the chops to prove it.

From the dark days of 1992-when the then-corporate parent of Capital Analysts, Fidelity Mutual Life, issued a "find-a-buyer-or-close-the-firm" ultimatum-until today, Cogan and the team of top managers he's hand-picked have built a mid-sized broker-dealer with an impressive array of products, timely proprietary investment research and the kind of hands-on customer service that most companies would envy. (Cogan really does answer his own phone, as do all the senior managers at Capital Analysts. In fact, the phone lines in the company's call-center desk roll over to them when the customer service reps get busy. The company policy is: No waiting allowed).

Insiders at the firm say that Cogan spent months soliciting and analyzing offers for the firm back in 1992. They also report that he decisively rejected several that would have been very lucrative for senior managers, because they would have undermined the home office, before deciding on Western and Southern Financial Group. Many advisors who left the firm because of the uncertainty (the total number of advisors dropped from about 500 to just over 200) have decided to come back. "I think that says a lot," Cogan says today. "I can also say that I'm probably the only president of a company that was bought ten years ago who can say it is better today than it was the first day." For the record, advisors say there is no pressure or incentives to sell the parent's annuities products.

Despite the long-running bear market that has taken a nasty bite out of larger broker-dealers' profits, Capital Analysts has managed to make money in each of the last three years, even with one of the richest staff-to-advisor ratios in the business. (They have one home office staffer for every ten advisors).

The reason for continued success? Cogan says it's because the company has consciously decided to work with advisors, and advisors alone, for more than two decades. The decision, he says, allows the firm to direct its services, products and platforms exclusively to those who practice planning. And the size of the firm allows staff to know each advisor by name, along with the type of practice he or she has built.

The decision is paying off. "For people positioned as advisors, it's a great time in the marketplace," Cogan says. "Investors who have been with transactional-type firms or were do-it-yourselfers really want and need advice now, and they're turning to advisors."

Just how serious is the firm about finding advisors? "There are no wirehouse people here," Cogan says. "Culturally, we're not the right fit for them. If in the first five minutes someone asks about payouts, we know we're not the firm for them."

The upshot to this determination to attract and support advisors is simple: More than one-third of the firm's top producers were profitable last year. "We have been increasing assets under management over the past three years, which is good news," says planner Robert J. Richards, president of EPA Financial Services Corp. of Toms River, N.J. "I really do think a downturn brings business to those who practice financial planning," adds Richards, who has had a ten-year working relationship with Capital Analysts.

He credits the company with helping him convert his firm to a fee-based practice in 2001, which has increased profitability. "They gave us the pros and cons of the conversion and then provided us with the programs we needed to make it work," Richards says.

The firm's planner-centric mindset is the thread that ties it together, from its investment programs and proprietary research to the field surveys and innovations they drive. "Most of our changes come from the field," says Susan Neeld, the company's director of resource development. "Simply put, we see advisors as our business partners."

Numerous surveys in the past year have given Capital Analysts ideas about how to direct and manage its resources into meaningful programs that range from Web-based consolidated client reporting to a new salary deferral program for advisors. What are advisors saying about the firm? For one, 96% say that the broker-dealer is meeting or exceeding their expectations, according to survey results.

One reason for advisors' satisfaction is undoubtedly the expansive investment research and intensive analysis the company has designed and developed for nearly two decades. To give advisors an edge, the company has created proprietary quantitative and qualitative screens for ranking and rating both mutual funds and stocks. The research also provides the underpinnings for the wrap-fee portfolios the company develops. "What differentiates us here is that we take research and convert it into something that benefits advisors and their clients," Cogan says. "We hope we convert it into wisdom, which we strongly believe investors are willing to pay for."

On the mutual fund front, the company has been creating its Capital Analysts Preferred Statistical Leaders list since 1987, ferreting out the statistical fund leaders over 66 quarters. Available quarterly only to advisors who work with the company, the list is one of the oldest and most comprehensive mutual fund ranking and research lists in the country (it predates Morningstar).

In the stock arena, the company creates its Core Equity Stock Portfolio, which uses quantitative research and qualitative overlays to find the best and brightest 25 stocks over the ten economic sectors that the Standard & Poor's 1500 and the Morgan Stanley stock lists contain.

"With these 25 stocks, we cover the entire spectrum of investing," says Steve Mayhew, the company's senior vice president and investment guru, who has been overseeing research, product design and due diligence since 1986. Mayhew is responsible for bringing hedge fund of funds to Capital Analysts advisors, along with other alternative investments like commodities funds (Oppenheimer's Real Asset Fund, for example).

"For advisors to really benefit, they have to buy into our investment philosophy, which has been successful over a very long time," Mayhew adds. "Broad diversification is the cornerstone. We don't engage in market timing or sector rotation, though we offer these services."

Another cornerstone is the creation of proprietary asset allocation models, which the company has been building since 1988. "A lot of companies do this now, but we have a long history and track record of doing it right," Mayhew says.

The upshot for advisors is access to both mutual fund, stock and fixed-income portfolios that are widely outperforming their benchmarks. For the three years ended March 31, the S&P 500 was down 16%, while Capital Analysts most aggressive stock portfolio was down 16% and it's least aggressive portfolio was up 1%.

"We're really strategic in nature, versus tactical," says Mayhew. "We have an eclectic advisor base ranging from one-person shops to firms with more than 20 advisors. The value they find in us is as a trusted resource to objectively decode all this information and create sense and direction for them."

On the fixed-income side, the company offers a wide host of products, including direct notes and internotes, which are direct initial corporate offerings that allow investors to buy low denominations that were previously only available to institutional investors. A recent offering includes GMAC's internote, which pays 4%. "That's attractive for investment grade," says Mayhew.

To help advisors compete further, the company has competitively priced its wrap fee programs at just 80 basis points, compared with the going rate of 125 basis points. This allows advisors to add on 50 to 100 basis points and still remain very competitive. "With all the fee compression going on, we knew that 3% programs were going to become 2% programs, so we changed our all-in costs accordingly," Mayhew adds.

Advisors like Capital Analysts' investment research, product creation and pricing. "They're pioneers in this kind of mutual fund and stock research, and it's very helpful to have these rankings and analysis," says John Clarke, president of Denver-based Grayhill LLC, which has worked with Capital Analysts for 35 years.

Clarke, whose firm uses wrap fee programs almost exclusively, says he also finds the company's prompt due diligence helpful. "If we're considering a private deal, say a mezzanine offering for a closely-held stock, they'll look at it and approve it as quickly as possible. They're sensitive to the marketplace. Also, they sometimes don't approve products, which in my view is good, too."

While Cogan says he's proud of the proprietary programs and research the company creates, he also is quick to point out that products and services can quickly become a commodity. What really sets a broker-dealer apart, Cogan contends, is its people and the relationships they have with the field.

The fact that Cogan started his career in 1974 as an investment advisor during that now-far-off bear market, and spent 13 years as a successful planner before joining the home office, doesn't hurt when it comes to creating a culture that values empathy and responsiveness to advisors the way Capital Analysts' seems to.

"They're coming through with everything they promised," says Minoti H. Rajput, president of Secure Planning Strategies of Southfield, Mich., which joined Capital Analysts 15 months ago after an extensive search for the right broker-dealer. Rajput, who specializes in doing planning for families with disabilities, was named one of Worth magazine's 250 Best Financial Advisors six years in a row. "I want to be heard, and I want answers right away, and that's what I'm getting here," she says.