Independent brokers set marks, reach milestones

A number of top independent-contractor broker-dealers have recently reached a variety of records and milestones, from best-ever revenue to increasing revenue from fees rather than commissions. The record setters include such leading firms as Raymond James Financial Services Inc. of St. Petersburg, Fla., Commonwealth Financial Network of Waltham, Mass., and National Planning Holdings Inc., a broker-dealer network based in Santa Monica, Calif. "There's a different reason for each firm's success," said Larry Papike, president of Cross-Search, a recruiting firm in Jamul, Calif. For example, when the stock market is strong, reps and broker-dealers are bound to benefit, he said. But the segment of the brokerage industry with independent contractors has grown and performed well over the past five to six years, Mr. Papike noted. "And I expect it to be strong over the next five to six years," he said. Raymond James Financial Services, which has more than 3,000 representatives and advisers, last Tuesday said that it surpassed $1 billion in revenue during its fiscal year ended in September, making it only the second independent-contractor broker-dealer to reach that level. LPL Financial Services of Boston and San Diego was the first. That total is more than three times the revenue it had 10 years ago, the company said in a statement. It also has more than 100 affiliated registered reps who produce more than $1 million in fees and commissions. Just four years ago, the firm had just 25 reps and advisers at that level of production, the company said. Also of note was the average adviser's annual production, which reached a firm high of $315,000. The average branch production also hit a high, reaching $692,000. At Commonwealth Financial, fee-based revenue now outpaces commission-based revenue. At the start of the month, the company said, fee-based revenue accounted for 53% of its total, while commission-based revenue accounted for 47%. Because they constitute recurring revenue, fees are more attractive than commissions to many broker-dealers. Commonwealth is the second independent broker-dealer to reach that level; Cambridge Investment Research Inc. of Fairfield, Iowa, was the first. "It's been building for years," said Wayne Bloom, Commonwealth's managing principal for wealth management. Among a number of factors in the increase is raising account minimums in fee-based accounts, he said. National Planning Holdings last Tuesday said that it has hit an all-time high in the number of affiliated registered reps and advisers, reaching 2,861 — an increase of 10% over the level a year earlier. The four NPH firms have turned heads in the industry because of the upfront money — 40% of reps' prior year's fees and commissions — it has offered to recruits in the form of forgivable loans. That is far beyond the industry norm. The broker-dealers in the network are Invest Financial Corp. of Tampa, Fla.; Investment Centers of America Inc. in Bismarck, N.D.; National Planning Corp. of Santa Monica and SII Investments Inc. of Appleton, Wis. Bruce Kelly can be reached at bkelly@crain.com.