The Sound of Silence

Stan Kaplan enjoys tranquility and peace of mind since going independent in 1996.

By Michael Hayes

Stan Kaplan answers his own phone. He also opens his own mail, pays his own bills, fiddles with his computer when it crashes, changes an occasional light bulb and files his own paperwork.

Inside his sparsely decorated office in East Hampton, N.Y., Kaplan is like a doctor who traded the din of a hospital emergency room for the tranquility of a private practice.

Kaplan is a sole practitioner, an independent contractor with First Union Securities Financial Network. And he is enjoying a solitude that most dyed-in-the-wool wirehouse brokers would consider utterly disconcerting.

“I am completely a one-man office,” Kaplan says.

Except for the occasional click of a time clock next to the black lacquered table that serves as his desk, Kaplan's office is completely quiet. In fact, during a three-hour span one Wednesday afternoon in February, his phone rang twice. The first call was from a recruiter and the second from a prospective client setting up an appointment.

“Some brokers love that wirehouse buzz, and some clients love that buzz,” Kaplan, 41, says. “Personally, I think better in a quieter environment.”

Kaplan was a broker in PaineWebber's downtown Atlanta branch when he decided to go independent in September 1996. Even at PaineWebber, he says, he noticed that successful brokers liked a tranquil workplace.

“You have lots of different personalities in a 40-person office,” Kaplan remembers. “But generally, the people who were doing well had the doors to their offices closed. They were working or were on the phone.

“The people who were having a hard time generating business liked to draw in others to commiserate with them. It was harder to stay focused. There were too many distractions.”

After four years with PaineWebber, Kaplan broke free and set up his own practice in Manhattan, using Corporate Securities Group (now part of First Union Securities Financial Network) as his broker/dealer. Roughly 100 of his 125 clients made the jump with him, a success rate he attributes to the fact that very few of those clients were inherited, he says. But Kaplan didn't win his independence without some nail biting.

“Any time you leave a firm, you have about a two-week period during which you have no clients and no assets,” Kaplan says, laughing at the memory of that nerve-racking time. “Until your clients have actually filled out their transfer forms and the assets show up on the screen, you don't feel comfortable.”

His production was $280,000 in 1996, the year he went independent, and spiked to $470,000 the following year. Since then, it has gradually fallen: $390,000 in 1998, $350,000 in 1999 and $180,000 in 2000 as he converts to fee business.

In September 1999, Kaplan made another strategic move, relocating his business and family to East Hampton, a trendy vacation spot on the northeastern coast of Long Island.

A Comfortable Routine

Kaplan's daily routine consists of a five-minute drive to the office at about 7:30 a.m. Once in the office, he checks market indicators on his workstation, tunes in to the morning commentary and reviews activity in his client accounts. Then he reads The Wall Street Journal and The New York Times.

At 9 a.m., he hits the telephone and starts setting up meetings with clients and potential clients, with a goal of two appointments every day. Like many brokers, Kaplan is moving away from commissions and toward fees. So during the meetings, he talks with prospects and clients about their portfolios and digs deeper into their total financial plans.

At the end of the day, around 5 or 5:30 p.m., Kaplan tackles the daily paperwork: filing trade tickets, paying bills, mailing documents he promised to send prospects and sending forms to the compliance department. When he is marketing his business more aggressively, his wife, Guerline, lends a hand. He carries his mobile phone wherever he goes.

“You have to wear a lot of hats when you are a one-man office,” Kaplan says. “You try to delegate and outsource as much as you can, but you often wind up doing a lot of this stuff yourself.”

His $3,000 monthly office expenses break down this way: $1,200 on rent, $500 on phone, $500 on computer, $100 on errors and omissions insurance, and $700 on utilities and miscellaneous expenses.

Kaplan really doesn't mind staying in the office a little late to handle the mundane tasks. He likes his surroundings. On the wall behind him hang three of his favorite paintings by Charles Keeling Lassiter, an artist who was popular in the 1950s. And in front of his desk are two stylish, but well-worn chairs that look from the same mid-century era. The office environment reflects his personality: comfortable, quiet and uncluttered.

Nothing fancy. But Kaplan wants it that way.

“When I was a wirehouse broker, my environment controlled me,” he says. “Today, I control my destiny.”

Business Strategies:
  • Carve out a calm office environment to stay focused on the tasks at hand.
  • Surround yourself with objects you like, such as artwork or furniture, so you don't mind working late if necessary.
  • Establish a daily routine that includes goals, such as two appointments with clients every day.

A Fresh Start

Kevin McBarron is adjusting to a new state and expanding his vision.

By Tom Nelson

A typical day for independent broker Kevin McBarron is … well, there is no such thing as a typical day right now.

In July, McBarron, 40, bought Wealthcrafters, an Irvine, Calif., practice and made a cross-country move from Florida. He is trying to run and grow a business while getting settled in a new state.

McBarron became an independent rep in 1997 after more than a dozen years working for Prudential Securities and Merrill Lynch in Clearwater, Fla. He affiliated with Sentra Securities Corp. and opened his own office also in Clearwater. Then, he acquired Wealthcrafters from a different broker/dealer for a change of pace and scenery.

“I like technology, and California — Irvine in particular — is way ahead of everybody in technology,” McBarron says. Plus, he didn't like where his previous hometown was headed. “The waterfront is Clearwater was changing, and I was going to buy a new home anyway.”

His move cost him only two of his 400 customers. Combined with those he acquired, McBarron now has 700 clients with assets under management of about $60 million. His 2000 production was just under $500,000 from a mix of commissions and fees.

“I couldn't have made the move if I still worked at a wirehouse,” McBarron says. “The branch manager would not have been happy, and my book would have been cannibalized. You're not allowed to buy or merge a business if you work for a big wirehouse.”

McBarron is more than happy to leave wirehouse ways behind. “I love the freedom here,” he says. “It's a huge benefit to you and clients when you don't have to answer to some corporate entity. I can run this business with only the clients' welfare in mind.”

However, the transition is costing him personal time. Running his own shop has extended his work hours from 9 a.m. to 9 p.m. And even before going in, he watches the market opening, makes a few calls, reads the business sections of the local papers and checks his favorite stocks while doing the morning daddy routine with his three daughters.

Once in, he puts out any office fires and runs the business by fielding client calls, checking reports, making sure orders took and executing trades.

After the closing bell at 1 p.m. Pacific time, it's lunch time. “Sometimes I'll have a nice meal in a good restaurant with co-workers or clients, other times it's a burger and the sports page at Burger King.”

McBarron then spends the afternoon trying to grow the business with more client calls and appointments. He averages three meetings a day.

The evenings, from 5 to 9, are just as busy. “I make at least two of what I call ‘big calls’ to [high-net-worth prospects],” McBarron says. He also meets with clients after work, does “scores of chores” and tackles stacks of paperwork.

On top of that, McBarron is scouting new digs. Part of the business purchase required that he buy the office lease, but it's not up to his standards. Currently, Wealthcrafters is housed in an industrial park under the flight path at Orange County's John Wayne Airport.

“We'll be out of here and in an office with a good view of the mountains soon,” he says. “I like windows, and I don't like it when clients have to pay to park.”

Aspiring to More

McBarron has a vision for his practice. Currently, he's the lead rep in a two-rep office with a registered sales assistant and a temporary administrative assistant. Broker Will Rae was McBarron's first California hire. McBarron foresees a staff of three brokers and two sales assistants. Adding to the ranks will ease his burden.

“I want to be fully staffed so my typical day consists of following the market, talking to clients and being done by 4,” McBarron says.

While he embraces the opportunity to build his practice, McBarron misses the comfort “of walking away from it all at the end of the day,” he says. Being an independent requires a heightened sense of responsibility.

“If something goes wrong, you're it,” he says. “You can't blame the branch manager.”

However, he favors certain positive aspects about his arrangement, including controlling with whom he works. “At a wirehouse, you can't hire and fire,” McBarron says. “They assign you an SA, and you have to share your SA with four others.”

Plus, McBarron likes his environment his way. “I couldn't even get a television in my office,” he remembers. “Some rep in Arkansas was more aware of what was going on than me, a Merrill Lynch broker.” He now has a TV in the outer office and another a few feet from his desk — both tuned to CNBC.

McBarron gets help with managing the financial demands from his wife, Brenda, a CPA. “She does the books and covers the office expenses,” he says.

McBarron has budgeted $125,000 for expenses this year, but expects that to increase after he finds a better location. “I know that's high-end,” he says. “Some guys spend $40,000 for a dinky office and part-time help, but I know what I want.”

Until he feels more settled, McBarron is keeping his nose to the grindstone. He concedes: “I do miss the camaraderie of joking with, laughing with and learning from other brokers. Once I get this business up and running the way I want, we'll have plenty of time for fun. And I plan to have more of it than I did at the wirehouse.”

Business Strategies:
  • Build business by acquiring another practice and integrating it with your own.
  • Ensure your office environment is communicating the right message about your services. If it's not, change it.
  • Formulate a long-term vision of your practice, including staffing needs.

Freedom Tales

Many reps go independent to create a flexible work schedule. Here's how four reps did it.

By Tracy Herman

No doubt about it. The biggest advantage of working as an independent rep is freedom. You can set your own schedule so you can blend work and pleasure in creative ways.

Meet reps with a passion for scuba diving, traveling and golf who have set up their businesses so they can take days or weeks off at a time to pursue these activities.

Diving Passion

Mel Hertz's favorite place to hang out is deep underwater. That's why Honolulu is a good place for him to live and work. The rep with IFG Network Securities spends six weeks a year scuba diving. He also has a passion for skiing, hiking and adventure travel. In total, Hertz takes off at least 10 weeks a year. “I'm never gone for more than three weeks at a crack,” he says.

“My goal in the next nine years is to be gone half the year,” Hertz says. “Every year, I add another week.”

He says he can enjoy a heavy vacation schedule because he learned how to organize his time through The Strategic Coach Program by Dan Sullivan. The main lesson: Hertz plans his free time at the beginning of the year and works around it. “It's my life that I'm living, not business.”

From the beginning, Hertz is upfront with prospects about his travel schedule. “I've only had two who have said they would rather not use me,” he says.

It also helps that Hertz's focus is on financial planning and managed money. “It gives me freedom,” he says. He chooses money managers for larger clients and uses mutual funds for smaller ones. With his asset base nearing $70 million, he follows modern portfolio theory, applying asset allocation and diversification principles.

Hertz hasn't pared his client roster to vacation more, but he does have a $100,000 account minimum. “I'm not taking smaller clients any longer,” he says. He is, however, still looking to build his business. He has 80 active clients and 150 total.

If clients need money or have questions while he's gone, they can contact his full-time, salaried assistant, Pam Lesch. “You have to have someone there to keep things on an even keel,” Hertz advises. She's capable of doing “anything and everything for clients” — except selling.

If that's the need, then there's another broker in the branch, Geoff Seymour, who can help. “If something comes up that has to get handled, he does it,” says Hertz, who supervises Seymour as the branch manager. The two are not formally partnered, but help each other when necessary.

Hertz likes a balance between work and play. “I'll probably never retire as long as I can work 26 weeks a year,” he says. “I plan to live to 120.”

Traveling the World

Frank Gleberman is a globetrotter. He travels internationally 15 to 18 weeks a year.

A 38-year brokerage veteran, Gleberman has racked up an impressive number of stamps in his passport over more than 20 years of traveling.

Where does the Marina del Rey, Calif.-based rep go? “There are several places I enjoy — the Caribbean, the South Pacific, and the Eastern Mediterranean including Turkey and Greece,” Gleberman says. “I pick out one new place a year. I have gone to 100 countries.”

As a principal with The Century Benefits Group, which is affiliated with Jefferson Pilot Securities, Gleberman tries to pass his travel bug on. Using fliers and e-mails, he invites most of his 380 clients on these trips, and usually travels with 30 to 60 people. “Half are clients,” he says. “The rest are friends from the yacht club and athletic club. When we come back, a few become clients.”

The trips are typically two weeks, but some stretch longer. “It's rare that we go for four weeks,” he says. “Even with e-mail and a cell phone, you still need to be in touch.”

Working with managed money, predominantly mutual funds, Gleberman does little individual stock trading. He has a partner based in West Los Angeles, Jack Gregory, who handles his clients while he's traveling. Gregory is the district manager for Jefferson Pilot Securities. Their arrangement isn't formal and doesn't involve fee sharing. “We're just doing it because we've been friends for ages,” Gleberman says.

And to make his business even more manageable, he's planning to shed some accounts by giving them away to other planners. He has 250 insurance clients and 130 investment clients, but is aiming to trim out 20% of them. He will pass along clients based on the complexity of their accounts, not revenue.

Gleberman has no complaints about his lifestyle. “In about seven to eight years, I'll probably be working half time,” he says. “I'll be 70 in seven years. I don't need to work. I do it because I enjoy it.”

Leading a Double Life

Some brokers divide their time between their office location and a second home. Doug Hesse and Jarratt Bennett are two examples.

Hesse runs Hesse Financial Advisors, a Securities Service Network firm in Roswell, Ga., and shuttles 100 miles to his house in Lake Oconee, Ga.

Bennett heads Bennett Financial Advisors, an IFG Network Securities firm in Fairfax, Va., and regularly makes the three-hour drive to his second home in Ocean Pines, Md., near Ocean City.

Hesse's pattern is to spend 4½ days in Roswell and 9½ days at the lake house. When he's at the lake, he works for a few hours in the morning using PC Anywhere technology, which connects him to his office computer. After that, Hesse, an avid golfer, hits the links.

“I have a wonderful staff, which allows me to play golf,” he says. The staff includes Robert Fezza, CFP, who does financial plans, and Barbara Field, his multitalented client service rep for 14 years. “She does whatever the client needs,” he says. Jan Ingersoll is a full-time administrative assistant and Sharon Lynn helps part-time.

While golfing is his main pleasure, Hesse sometimes mixes in business by inviting clients for a round. “I have earned a substantial amount of money by playing golf,” he says. Hesse Financial Advisors has $180 million in assets under management.

Bennett also credits his “excellent staff” for keeping his office humming. Sarah Murphy, his licensed assistant for 11 years, runs the office and delegates to Judy Garber, who does administrative work, and Dana Wozny, who does marketing. All receive a salary plus a bonus.

After working in the Fairfax office Tuesday, Wednesday and half of Thursday, Bennett drives to Ocean Pines and stays until Monday afternoon. “I go boating, play golf, write music, read, write and travel around with my wife,” he says.

It's not all play, though. He has 40 to 50 clients in Ocean City and writes a newspaper column there.

Running a managed money business, Bennett has about 350 clients and hasn't pared back to accommodate his lifestyle. “I haven't found a reason to do it,” he says. “I'm adding clients almost continuously. It's a nice problem to have.”

Another interesting twist: As an eventual exit strategy, both brokers sold their businesses and now are employees of the purchasers. Hesse sold to Centurian Capital Management in La Jolla, Calif., and Bennett sold to Reliance Trust Co. in Atlanta.

They made the decision to sell for the same motive — they wanted an exit strategy if they needed it for health reasons. Bennett's contract says he can stay on indefinitely, while Hesse's contract requires him to work a minimum of three years and as long as he wants after that.

Freedom Facilitators:
  • Use time management techniques taught by The Strategic Coach (www.strategiccoach.com; 800/387-3206).
  • Maintain a $100,000 account minimum.
  • Employ a self-reliant, skilled assistant.
Freedom Facilitators:
  • Invite clients to go along when you travel.
  • Partner informally with another broker outside the office.
  • Shed clients when your book grows or when they don't fit your business.
Freedom Facilitators:
  • Hire and train a complete staff, including other brokers and assistants.
  • Build business in another resort-style destination and see clients there.
  • Sell the business to a consolidation firm, and then work as an employee.

Transition Stories

When you own your own business, you can choose a successor and plan your exit.

By Tracy Herman

Retiring is a big step. Clients have become friends, and you don't want to leave them in the lurch. If you're an independent rep, you can select a suitable buyer for your business and orchestrate your exit so it's gradual. Or you can choose to stay on until you can't.

Meet two brokers in the midst of transitioning their businesses to a successor they picked personally.

Creating a Contingency Plan

Mat Summers, a broker with Linsco/Private Ledger in San Diego, is entrusting Mark Kohn to serve his clients. He brought on Kohn as a back-up strategy in case he needs to retire because of health reasons.

Previously, Kohn and Summers worked under the same branch manager. But in March 2000, the two reps went off together, and Summers became the branch manager.

“I was looking for somebody with the same broker/dealer and the same philosophy,” says Summers, 61. “I have introduced him to a number of clients. They feel comfortable with him.” The two share an investment strategy focused on managed accounts and rooted in modern portfolio theory.

A 30-year financial industry veteran, Summers is still in the process of acquainting Kohn with 400 clients. “The goal is to finish it off this year,” he says. “Things I've done in the past, I'm having him do.”

In broaching the issue during quarterly reviews with clients, Summers says: “I've taken on an associate. I don't plan to totally retire until I'm forced to due to health.”

Although Summers uses the title associate when referring to Kohn, Kohn is his equal. Both have their own production numbers and a joint number for new business. They have a buyout agreement that only goes into effect if Summers becomes disabled or dies.

But before he put this arrangement in place, Summers was uncomfortable thinking about what would happen with his clients if something happened to him. “These are long-term associations,” he says. “I take it to heart.”

Finding a suitable match was difficult. “I attempted it before, but it didn't work,” Summers says. “In this situation, Mark is willing to give to get. He's very upfront. We have a good relationship. He's taken the position of the back room. A lot of people would want to dominate.”

Eventually, the two plan to have Kohn become the manager so he can run the branch.

“I would like to keep working with my clients,” Summers says. “It's a business built on relationships. There isn't a friend I have who's not a client. And clients become friends. You want to protect that, protect them.”

Easing Clients Into Change

Ray McPharlin and his wife, Sharon, found his successor, Paul Giles, at a bagel shop in summer 1999. Well, not exactly.

McPharlin, 67, and Giles had worked in the same American Express office in Troy, Mich., but Giles left for another firm 2½ years before. They ran into each other at the bagel shop and started talking.

“I had been interviewing many people for six to eight months before I ran into Paul,” says McPharlin, a 19-year veteran. “I was not totally happy with my prospects. I called him a few days later and said I would like to set up a meeting.”

Initially, Giles hadn't thought about going back to American Express. “I left for better products and higher payout,” he says. “But Sharon and Ray shared the changes that had taken place at American Express.” So he was open to the idea.

Certain qualities made Giles stand out from prior prospects. “I liked his flexibility,” McPharlin says. “It's an important asset. Some people we interviewed were not flexible. One person wanted me gone the next day. That's not the best for the practice.”

Giles reviewed detailed data on McPharlin's business, including rankings of client accounts, and made an offer. The two agreed on a sales price based on revenue, and Giles made a down payment. McPharlin is financing the balance in a four-year promissory note. A lawyer drew up the formal agreement.

The transition started in January 2000. “Ray and I agreed it wouldn't be a complete separation,” Giles says. “It would be a smooth transition. Ray introduced his influential clients to me in the first year, and we started doing new business on a shared basis.” Joint business in 2000 was split 50-50.

The pair discovered their planned transition timeframe of one year was too short. “Last year was supposed to be my retirement year,” McPharlin says. “But it was a busy year of introducing clients to Paul and seeing new clients.” This year, he's cut back to about three or four hours a day, finishing up business started last year.

The business is large: 650 clients with more than $100 million in assets under management. About 80% of clients are from one large employer and 90% of the money is retirement rollovers, Giles says. Many of them are blue-collar workers.

After initial client reaction, the brokers had to change their approach. “We were running into shock on behalf of clients when we told them I was retiring,” McPharlin explains. “We had to tone that down to say I'll be around.”

Clients needed some reassurance from McPharlin. “They have questions and would like to know about Paul,” he says.

Over time, clients have adjusted. “Most of the clients are OK with me now,” Giles says.

The bottom line during a transition: Focus on nurturing client relationships, McPharlin says. “That's what we're trying to transfer over — some degree of trust.”

Transition Solutions:
  • Find a successor with a similar philosophy and background.
  • Meet with clients in person to explain the new arrangement and ensure they are comfortable with it.
  • Continue working but make a transition agreement that is triggered if you become disabled or die.
Transition Solutions:
  • Start early and spend time finding the right person to take over.
  • Move slowly in introducing clients to your successor.
  • Emphasize your confidence in the successor to develop clients' trust.

RR Survey: Insights on Independents

An RR exclusive survey shows independent brokers like having freedom and operating small practices, but sometimes struggle with the workload.

By Janis Samaripa

By their nature, independent brokers have businesses and backgrounds of all shapes and sizes, but most have one thing in common: They cherish their freedom, according to Registered Representative's exclusive Independent Contractors Study.

Slightly more than 50% specifically cite freedom or independence as what they like best about working as an indie.

Others say building a practice and equity (15%), ability to serve clients without interference (12%) or their ability to choose the products they want (15%) are the key advantages of being independent. Only 12% mention payout as what they like most, while 4% cite other choice features.

The survey includes data collected from 299 respondents who are principals in offices affiliated with independent broker/dealers. Here's a look at their characteristics as well as the basics of the businesses they run.

Who They Are

The average respondent has been an investment professional for 14 years, nine of these as an independent contractor. Respondents were mainly male, at 83%, and were an average age of 47.

Geographically speaking, most respondents are from the East Coast, at 40%, another 23% are from mountain or Pacific states, 24% are from the northern central region of the country while 12% are from the southern central area.

More than eight in 10 respondents have some college in their educational background.

Forty-two percent graduated college, 18% did postgraduate study without getting a degree and 23% have a postgraduate degree. Only 3% are high school graduates or less, 12% attended college without earning a degree and 2% didn't answer the question.

The work backgrounds of the independent respondents also vary.

More than a quarter (27%) worked for a wirehouse immediately prior to becoming an independent and 20% were from regional or local brokerage firms. Another 26% were from allied fields such as an insurance company, accounting firm or discount brokerage. Meanwhile, 21% are new to the industry, either coming from another field or starting as their first job. And 6% had other answers.

Nearly nine in 10 respondents are Series 7 registered (87%). The next most popular licenses are for insurance products (62%), and life and disability (54%). In addition, 45% report they hold a Series 65, or registered investment adviser license.

What They Generate

The average personal production of respondents is $277,000 over the past 12 months. However, large producers might skew this average higher since more than half bring in less than $150,000.

The size of the firm respondents establish also plays a role in the production they generate. Reps who work at larger offices have a higher personal annual production. For example, those with one employee in the office have an average gross production of $211,000, while those with six or more employees in their office have an average personal production of $329,000.

Production also increases with experience. Those who have been in the industry 20 or more years produce an average of $388,000, compared with the $113,000 brought in by those in the industry five years or less.

Commissions account for more than three-fourths of office revenue for independent brokers. The average breaks down as 77% commissions, 19% asset-based fees and 4% hourly fees/fee for service. However, 86% of respondents see the fee-based business area growing.

Meanwhile, mutual funds make up the largest percentage of respondents' business, at 42%. General securities represent 19%, annuities 16%, managed accounts 10%, life insurance 9% and other products 4%.

A respondent's business mix changes based on his background. For example, former wirehouse reps are more apt to sell securities. By the same token, people from the insurance field are more likely to offer insurance and annuities.

Who's on Staff, What it Costs

Independents have the ability to set up their offices in any manner they see fit. And the survey shows that respondents take advantage of that freedom, but favor keeping their practices small.

Among those who answered the question about total employees, the largest group (29%) says their office includes just two to three people. Another 21% say they are the only employee. At the opposite end of the scale, 15% have more than 10, 18% have six to 10 and 17% have four to five on staff.

Firms with two to five staff members typically have one principal, one administrative assistant and another producer. Meanwhile, offices with six or more staff members have multiple principals, multiple other producers, multiple administrative assistants, a marketing person and a computer operator.

The principals in most offices receive nearly half of every dollar in gross revenue, at 46%. Expenses for staff, rent and other costs account for 26%, while the broker/dealer receives 28%. The survey did not break down dealer charges like ticket charges or technology costs.

However, the percentage of revenue that goes to principals increases with experience. Those in the industry 20 or more years receive 52% of revenue and 22% goes to the broker/dealer. Respondents with less than five years experience receive an average of 40% and 39% goes to the broker/dealer.

One-person offices bring in more for the principal at 56%, while offices that generate $1 million or more in gross pay less to the principal at 43%.

Hurdles for Independents

The logistics of transferring accounts and operations work tangled up many a rep making a transition to independent status, according to the survey.

The next biggest struggle was to learn new systems. Many respondents couldn't choose a single difficulty, saying they found multiple factors troubling during their transition. However, getting clients to move was the least problematic for respondents.

Now after having operated as an independent, some reps complain about certain aspects of the job. Among those who answered what they like least, most are unhappy about the workload as well as support problems.

Others mention they are uneasy about the financial risks and expenses associated with their chosen work arrangement. Finally, another group dislikes the isolation and loneliness of being an independent.


Methodology: A 3-page survey was mailed in November 2000 to 1,000 independent brokers who subscribe to Registered Representative. A follow-up mailing was sent in December.

A total of 299 usable surveys were received for a response rate of 30%. The answer base on the charts provided is 299 unless noted.

Data collection and analysis were conducted by Intertec Corporate Planning and Research in Atlanta.

Registered Representative would like to thank the independent brokers who participated.

Rating the Broker/Dealers

Remembering back to their process of selecting a broker/dealer, respondents declare that the firm's service overall was the most important factor. They also say fair fees and compliance were essential considerations.

Now after working with their chosen broker/dealer, respondents rated how well the firm is performing in key areas. For the most part, firms are doing well in service and compliance. Nearly two-thirds give those factors a rating of four or five on a five-point scale, where one is not satisfied and five is very satisfied.

However, reps are less happy with their firm's marketing support, transition support and managed account programs.

Why the Switch?

Lots of respondents have lots of reasons for becoming an independent contractor. In fact, three-quarters say that several factors drove them that direction (76%).

The survey allowed reps to give multiple responses.

About 56% say pay concerns contributed to their transition and a similar number sought greater independent product selection. A personal situation motivated just over half at 53%, and 52% were seeking a different work environment in general. Ethical reasons drove 42%, 38% wanted better control over expenses and 33% wanted to create equity.

Respondents who came from wirehouses were more likely to have made the transition for ethical reasons at 61%. These reps explain they were often encouraged to place clients into proprietary products not always in the best interest of the client.

And respondents with high personal production of $250,000 or more were most likely (62%) to indicate that greater independent product selection contributed to their move.


Registered Representative welcomes your comments on this story. Contact Senior Editor Michael Hayes at Mike_Hayes@Intertec.com and Senior Writer Tom Nelson at Thomas_Nelson@Intertec.com or call our editorial department at 800/621-0720.