"We don't think we're any smarter than anybody else," David Rosenow humbly began. "It's just maybe we're better listeners at times."
Rosenow, vice president of business and product development with Harbour Investments, was responding to the question of what makes the Madison, Wis.-based broker-dealer better than its competitors, many of whom have recently shut their doors. Since Harbour is a small firm somehow thriving in a space under fire, it seemed a natural starting point. Despite his diplomatic answer, Rosenow nonetheless surprised us.
"We have a 'no-OSJ' platform," he added.
Come again? In an era of ever-expanding offices of supervisory jurisdiction, to the point where it's increasingly difficult to distinguish between broker-dealers and larger branch offices, Harbour completely eschews the business model. Why?
"This is how we've run our practice and our business all along," Rosenow explained. "And could it be considered bucking a trend today? Yes and no. Our staff is highly educated and very experienced. Of our 19 staff members, 11 are principals, and three are testing to be principals. So everybody is managing all of the reps. It's not just one person as a chief compliance officer bringing in and interpreting the rules; it's all of us combined."
Or, as Rhonda Meyer, the firm's vice president and chief operating officer, put it, "it's common sense, as well as pulling together all of our resources that we have on the staff."
You'll find Habour is contrarian in how they run their business, and the way in which they're succeeding is what makes them so interesting. Founded in 1987 by industry veteran Nick Sondel, the firm's president and CEO, it has always existed as a small (dare we say boutique?) broker-dealer, counting just 192 producing reps 25 years later. And it appears to be a great place to work, with employee tenure at the home office averaging 13 years.
"When I started the firm so long ago there were a lot of small broker-dealers around, but there weren't many that seemed to have common sense," Sondel said, reflecting what appeared to be a theme at the company. "The people that I knew in the business wanted some sort of track they could run on that they could rely on for good judgment and someone they knew was going be fair. I always felt there was enough money to go around. If everybody is being fair to one another, we should all grow together."
It was the "injustice and rigidity in the business back then" that Sondel (right) said drove him to start Harbour. And it's this commitment to keeping it small, frequent communication and strict but fair oversight that kept the firm from the Medical Capital/Provident Royalty trouble that felled so many others—to the point where industry watchers are legitimately asking if, combined with increased costs of doing business, smaller broker-dealers will even survive as an industry.
"The message that gets out to the field comes from a centralized location, which is us," Rosenow said. "It's not then patterned or pushed to another set of managers who then try to get the next interpretation to the advisor. Everything comes from us; even though they run their businesses differently, they get the exact same interpretation of a rule."
Not that they're control freaks. While they understandably want a consistent message in their interpretation of rules and regulations, like many independent broker-dealers, they trumpet their "hybrid model," one that allows the reps to either establish their own RIA or join the firm's under the corporate RIA umbrella.
"If they choose to establish their own RIA, they are not holding their assets inside of our broker-dealer or our platform," he added. "They have their own office code and can have the assets held with whomever they choose, whether it's Schwab or TD Ameritrade or someone else. At that point we just have access to their information."
As for trends they're seeing in the hybrid space, it's all based on the amount of assets.
"It's the old cliché, 'I'd rather be lucky than good,'" Rosenow (left) responded with a strong hint of humor. "And that goes for pretty much anything. I think because of our highly experienced staff, we almost create the luck. It also evolves from how we recruit. We do not have a recruiter. Rhonda, myself and two people on my team are the recruiters. When we're out talking to potential recruits, it's the people who do that day-to-day running of the business; it's not a recruiter who's going to get a bonus because they just landed somebody. We're looking for the long-term rep advisor who's going to stay with us, and we're going to earn their business every day."
Judging from Harbour's success, however, Meyer (left) might not have a choice, especially as more small broker-dealers shut their doors and more reps find themselves in desperate need of a home. The environment like the one Harbour offers might have them come running.
