Having now spent over 20 years within financial services, it has become evident that we love our industry buzzwords! They are thrown around so much that they are often used incorrectly and have come to describe generalities in conversation.
The #1 offender is scale. There are several interpretations of it but by definition, having scale is all about adding efficiencies so a business can get more done in less time, and ultimately be more profitable. However, several of the industry’s largest firms who support financial professionals are notoriously expensive from a “core affiliation cost” perspective. From a compliance perspective, they have a box to fit Financial Professionals in and if you do not fit, you will have to move on. How can this be? It is the opposite of what scale means.
When working with Financial Professionals who are considering a change of firms, I often point out that these firms do not use their scale properly on behalf of the Financial Professionals. This begs the question, how can a mega firm who is charging more to Financial Professionals than their smaller competition be using their scale as an advantage? Simply, they cannot, and size should not automatically imply scale.
This is key because I believe that a firm modeled as a true financial professional-support-firm which is in place as an extension of a financial professional’s practice is truly providing scale. Partnership is scale.
When a service provider such as a broker-dealer is in partnership with their financial professionals, growth will be achieved faster and at maximum efficiency. This is done through the alignment of interests and acting upon feedback which enables a forward-thinking environment. Within this culture, stronger workflows and processes are then created. An aligned partnership fosters complete transparency and establishes true vendor relationships who want to do more than place product on the shelf. The aligned-partnership model wants to help their financial professionals gain visibility to their marketplace through design & marketing and by assisting in increasing their online presence. It will provide choice on custodians and have higher payouts and lower core affiliation costs, lower asset management fees and platform fees (platform fees on Rep as PM business can have a significantly negative effect on a Financial Professional’s bottom line). This is partnership, and this is scale used properly on behalf of the financial professional.
When seeking a new firm, Financial Professionals can receive a “check” to make the switch. The check is often an enticement to win the business, but it always comes with strings attached. The “house” always wins. I have consulted with many Financial Professionals who have been burned in the past and refuse to go down that path again. They are no longer interested in the highest bidder because they know the break-even with a proper partner-firm will only be a few years; they also know they may have to answer to clients. What they are seeking, is alignment. Alignment with a firm who is interested in supporting their practice with the resources that will help them achieve their own growth goals, and not the goals of the firm they are moving to.
By the numbers, IFP is a mid-sized broker/dealer & RIA. In today’s day and age, we have never been more confident through selective staffing at the corporate level and methodical Financial Professional recruiting, in our ability to help our financial professionals experience rapid growth. This stems from a culture of collaboration and personal relationships which is not found at the big-box firms who seem to be more interested in shareholder and/or private equity returns.
The way we see it, the client and financial professional win first and the firm wins second. This is partnership. Partnership is scale.