Of the many ways to go independent, one Merrill advisor found his bliss at an RIA/independent broker-dealer affiliate that he credits with tripling his revenue.
"The advisor was doing $450,000 of gross revenue, which at Merrill means he keeps about $150,000 of that — 40% give or take," says William Hamm, CEO of Independent Financial Partners (IFP), one of the nation's largest RIA firms.
Hamm, in an interview with ThinkAdvisor, explained what changed in the former wirehouse advisor's transition to his status as an independent working through IFP, an LPL affiliate.
"There were accounts at Merrill Lynch that he wasn't getting paid on but now he could once in an independent channel. Moving to our platform opened a number of retirement plan opportunities because now he could be a fiduciary on the plan; and third, captive insurance … opened up another line of revenue generating services."
The result is that, four years later, the former wirehouse advisors is producing about $1.4 million in revenue.
Hamm shows a desire to be fair in sizing up the matter by saying that "this advisor would have grown regardless of whether he was here or corporate [i.e., part of LPL's general network]." But he adds that the advisor "keeps telling me joining IFP was one of the best decisions he ever made."
Whatever the relative merits of going independent through a large broker-dealer network or joining a firm within a firm through a hybrid RIA, IFP would appear to be doing something right.
In 2013 the firm grew to $5.2 billion in client assets under management from $3.3 billion the year before. Natural growth based on the stock market's nearly 30% gain last year would not have added more than a billion dollars — actually less, considering the reality that clients don't typically own 100% U.S. equity portfolios. So most of the firm's robust gains must have come from its adding of new advisors.
Indeed, Hamm says the firm brought on between 55 and 60 new advisors, bringing the Tampa-headquartered firm's total number of advisors to 475 nationwide. And that, he says, is less than the 85 to 90 advisors IFP averaged the previous three years.
"We took a break in recruiting last year because we completely changed our technology and back-office programs," Hamm said.
Those additions include a new compliance system that conducts surveillance on all custodial accounts and produces exception reports if rules are broken, as well as paperless sytems that allow advisors to conduct all business with clients end-to-end electronically, where "no paper touches anyone's hands," Hamm says.
But though the technology pause produced fewer recruits, the new advisors have a higher production profile. Hamm says the new advisors average $330,000 in annual revenue compared with the previous three years' average of about $235,000 in revenue.
"We're making a specific effort to move in that direction," he says.
Indeed, the IFP CEO is the firm's chief recruiter, complementing a full-time recruiting and transition staff, and has recently been talking to firms with seven-figure revenues. He says advisors come to IFP from across the wirehouse, independent and bank advisory spectrum (but only rarely from LPL itself — usually just cases where an advisor "has a specific business need," such as joining an OSJ).
Hamm, who started IFP 14 years ago after having been an advisor for 30 years, says his goal was to create something he would have wanted as an advisor.
Those elements — the firm's value proposition — start with a high payout. "We are one of the highest, or the highest payout in LPL," he says. On commissions, IFP's payout is "about the same" as LPL's corporate BD (which ranges from 75 to 93%), but "3 to 4% higher than through LPL's corporate RIA, and our platform has no administrative fees."
