Financial Institutions Research Report Series & Financial Advisors Research Report Series

A Comprehensive Overview of the Product Usage, Business Models, & Best Practices of Independent Reps

June 2003

TABLE OF CONTENTS
INTRODUCTION BENCHMARKING: A DETAILED REVIEW OF OVER FIFTY KEY BUSINESS PRACTICES OF INDEPENDENT REPS Business Background & Industry Position Business Tenures Age Became a Rep Started or Joined Current Business Joined Current Broker/Dealer Licenses & Designations Representative Functions Prior Occupations Conferences Attended Publications Read & Web Sites Visited Publications Read Web Sites Visited Conclusions Clients & Marketing Strategies Market Segments Served Sources of New Client Assets Marketing Methods Marketing Materials Used Seminar Materials Used Newsletters Used Web Site Developers Used Conclusions Investment & Insurance Products Used Investment Products Used Mutual Fund Companies Used Annuity Companies Used Turnkey Asset Management Programs (TAMPs) Used Separate Account Managers Used Other Insurance Products Used Insurance Companies Used New Investment Products Used Conclusions Back Office Processes & Technology Use Independent Broker/Dealers, Custodians, & Clearing Brokers Used Independent Broker/Dealers Used Custodians Used Clearing Brokers Used Specialized Trust Companies Used Financial Planning Software Used Asset Allocation Software Used Data & Research Services Used Portfolio Management Software Used Contact Management Software Used 6 36 36 36 36 37 39 41 44 45 47 49 52 52 56 58 59 59 61 62 64 64 66 68 70 70 71 72 75 77 80 81 82 84 85 86 86 86 91 94 97 98 100 101 104 106

03.06.01 Independent Rep Best Practices

Tiburon Strategic Advisors, LLC

Conclusions Business Economics Staffing Employee Mix Number of Partners Number of Employees Total Staff OSJ Supervision Revenue Allocation Income Statement Highlights Number of Clients Assets Under Administration Revenues Revenues Overseen by OSJs Expenses Pre-Tax Profits Return on Assets (Revenues/Assets Under Administration) Pre-Tax Profit Margins (Pre-Tax Profits/Revenues) Assets Under Administration Per Client Revenues Per Client Pre-Tax Profits Per Client Clients Per Partner Assets Under Administration Per Partner Revenues Per Partner Pre-Tax Profits Per Partner Clients Per Employee Assets Under Administration Per Employee Revenues Per Employee Pre-Tax Profits Per Employee Annual Growth in Number of Clients Annual Growth in Assets Under Administration Annual Growth in Revenues Annual Growth in Pre-Tax Profits Expense Allocation Rep Compensation Administrative Support Compensation Rent/Marketing Expenses Marketing & Advertising Expenses Travel & Entertainment Expenses Conclusions Business Policies & Industry Views Business Goals Business Threats & Challenges Fee-Accounts Pricing Schedule Fee-Based Brokerage Accounts Broker Wraps Mutual Fund Wrap Accounts Separately Managed Accounts Retirement Plans Business Exit Strategies Written Business Documents

108 109 109 109 111 112 113 113 114 116 117 118 118 119 119 120 121 122 123 124 124 125 126 127 128 129 130 131 132 132 133 134 134 135 136 137 137 138 139 139 142 143 144 145 145 146 147 148 149 150 151

03.06.01 Independent Rep Best Practices

Tiburon Strategic Advisors, LLC

Compliance Manuals Policies & Procedures Manuals Client Agreements Business Plans Employee Manuals Marketing Plans Employee Evaluation Procedures Succession Plans Financial Advisor Coaches Conclusions

152 153 154 154 155 155 156 156 157 159

BEST PRACTICES: BUILDING A BUSINESS BASED ON THE KEY LEARNINGS FROM LEADING INDEPENDENT REPS 160 Determine Clear Target Markets 160 Investable Asset Levels 161 Sources of Prospects Assets 163 Choose Product & Service Offers to Support Chosen Target Markets 164 Fee-Based Pricing Models 164 Investment Consulting 169 Wealth Management & Life Planning 171 Develop Appropriate Marketing Methodologies 174 Passive Client Referrals 174 Proactive Client Referrals 176 Other Sales & Marketing Methods 177 Build the Necessary Support Infrastructure 178 People Leverage 178 Technology Use 184 Define Business Goals & Develop Written Plans 187 Economic Measures 187 Business Documentation 188 Succession Plans 189 Financial Advisor Coaches 190 Conclusions 190 VENDOR FEEDBACK & TIPS FOR BETTER SERVING INDEPENDENT REPS Independent Broker/Dealer Satisfaction Ratings Independent Broker/Dealer Utilization Independent Broker/Dealer Satisfaction Independent Rep Comments Comments on Royal Alliance Comments on SunAmerica Securities Comments on FSC Comments on Advantage Capital Comments on Sentra-Spelman Detailed Feedback on Independent Broker/Dealer Offer Components Payouts & Fees Customer Service & Operations OSJ Managers Executive Management Technology Offerings & Support Product, Sales, & Marketing Support 191 191 191 191 192 192 193 193 194 194 195 196 197 198 199 201 205

03.06.01 Independent Rep Best Practices

Tiburon Strategic Advisors, LLC

Training & Educational Opportunities Field Support Satisfaction with Custodians, Clearing Brokers, & Specialized Trust Companies Satisfaction with Custodians Satisfaction with Clearing Brokers Satisfaction with Specialized Trust Companies Conclusions Mutual Fund Company Satisfaction Ratings Mutual Fund Company Utilization Mutual Fund Company Satisfaction Detailed Feedback on Mutual Fund Company Offer Components Conclusions Other Vendor Satisfaction Ratings Utilization of All Leading Vendors Satisfaction with All Leading Vendors Conclusions Strategic Value Added Opportunities Sales & Marketing Assistance Product & Service Expansion Assistance Business Building Assistance Succession Planning Assistance Conclusions

208 210 211 212 213 215 216 216 216 217 219 220 220 220 220 222 222 222 223 224 225 225

Duplication or distribution of this report, and/or the data in this report, is strictly prohibited without the written consent of Tiburon Strategic Advisors, LLC

03.06.01 Independent Rep Best Practices

Tiburon Strategic Advisors, LLC