In response to rep demand the firm, which has experienced major growth since its founding (growing to 450 reps in just four years), is adding more third-party managers and banking products. Next Financial also launched a Web-based aggregation program in mid-2003. "It's typical for clients to have money at a number of different places. Maybe they have some at American Funds, MFS, some in a Hartford Variable Annuity. Some of it with Nationwide in insurance. This allows our reps to collect and report on all the necessary and important client information, regardless of where the client money is custodied," says Auld.

"This is very valuable for the rep," he adds. "It used to be if you were preparing for a client meeting, you might have to create an almost manual report to show a client's current position, where investments were with other firms. Now they can use this program to show updated positions, share values and prices, along with performance and asset allocation charts and reports. Then they can print the reports or e-mail them, or allow clients to access them on their own Web site."

Helping existing reps grow led Securities America in Omaha, Neb., to grow to $240 million in gross revenues in 2003, up from $210 million the year before. The firm is devoting a number of resources to online reporting and aggregation and on-site practice management consulting, says Chief Marketing Officer Janine Wertheim. As importantly, the company is aggressively recruiting reps, adding 300 in 2003 with about $30 million in gross commissions and fees, for a sizeable independent network of 1,515 reps.

The company's "branch expansion network is helping existing branches recognize their full potential and in some cases that means swimming upstream," Wertheim says. Securities America will send in a practice management consultant to branches that request help, and set up everything from training and lead generation programs to seminar tools to strategic planning steps to help the firm grow.

She expects the sizeable rep network will grow the firm by another $750 million in new assets next year. Still, there will be challenges this year and in the future, says Wertheim. She and other independent broker-dealers are chafing at the regulatory onslaught generated by regulators seeking abuses in the area of mutual fund breakpoints and fees, and in soft dollar practices.

While most broker-dealers have already done a good deal of the work to find clients who may have missed break-point discounts, many executives are worried about how regulators will come down on the soft dollars broker-dealers accept from mutual fund companies to put their funds on the shelf. Typically, brokerage firms use the money for rep education, seminars and conferences. Going forward, the money will have to come from somewhere or reps may simply receive less education.

"The margins at broker-dealers are pretty skinny, so the downside is that payouts will have to change," says Roame. "Of course it's bad to disguise things, but economic reality dictates that if the brokerage firm has to pay, the money will have to come from someplace."

Calling this latest investigation "devastating," one executive says, "If things like this resulted in truly lower fees or better performance for clients, that would be one thing. But that won't happen. All this means is that mutual funds won't have to pay us, and instead they'll be able to use soft dollars to take traders to hockey games and Sparks steakhouse."

Wertheim says her main goal is to keep reps from getting overwhelmed by the regulatory onslaught. But she admits that was a tall order in 2003. "Every time we move to the next generation of technology, the regulators throw in the next requirement. We can't let reps get buried. I'm not against more client disclosure, but it would be better if regulators came out with a long-term game plan instead of always being in fire drill mode. The real problems occur when regulators are creating the political agenda of the month and say, 'Let's throw something out there and see if it sticks,'" Wertheim says. "As an investor, I find the amount of paper I get mindboggling. I'm not sure more paper will help the investor. Continuing to create well-educated advisors will help the investor. So that's what we'll continue to do."


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