(continued)

"That merger was extraordinarily successful from a financial standpoint," Goldwasser says. "It put us into a relatively robust situation going into the [financial] storm that took place right after the merger. The storm created a variety of opportunities. There's been a lot of movement among independents." The firm picked up a smattering of ex-wirehouse reps during the market dislocation, Goldwasser says, and last year the firm picked up a former ING rep with a $70 million book. Some of its most recent recruits? Ten former advisors from GunnAllen.

GROWTH IS GOOD

One of the issues that face many of the most successful independent broker-dealers is how big they should actually grow. Obviously, it's a good problem to have. But still, executives at Securities America, which placed sixth in this year's survey, spoke candidly to Financial Planning earlier this year about the fact that many of their reps don't want to see the broker-dealer get much bigger for fear of losing the personal bond they feel with the company.

Executives at Cambridge Investment Research, which topped this year's survey in terms of revenue growth (3.2%), don't harbor the same sort of reservations. The Fairfield, Iowa-based firm currently has 350 associates serving 1,800 advisors. Amy Webber, president and chief operating officer, says that as long as Cambridge can maintain the culture it has built over the years it will continue to grow.

"We love growth and we don't often sit around the boardroom talking about how large is too large other than how it relates to service," she says. "The intimacy factor takes effort. You have to work at maintaining your culture and understanding that every advisor is unique."

Nevertheless, Webber says, it's important for the firm to have "controlled growth." This means that Cambridge has made an effort to be innovative, but within the confines of a conservative approach to business. "Scale offers a lot of advantages. We can leverage our scale from that growth and make [the advisors] better," Webber says. "So growth is a good thing as long as you can continue to spend time on your culture and make sure you don't lose that intimacy."

Mark Mettelman, president and CEO, of Triad Advisors in Norcross, Ga., a new entrant in the FP50, says the firm benefits from being a midsize firm, which he refers to as a "boutique alternative" to both smaller and bigger broker-dealers. As with Goldwasser, his firm has benefited from the scale provided by a corporate parent. In Triad's case it's Ladenburg Thalmann Financial Services, a 134-year-old investment bank headquartered in Miami.

"We're certainly interested in growing," Mettelman says. "But we've always been careful about how we grow. We really stick to our model."

Triad increased its total reps to 450, from 400, between 2008 and 2009, which is good for about 12.5% growth. Mettelman says that over the past three or four years the firm has added roughly 70 to 75 new advisors annually. About 95% of the business comes from referrals, which Mettelman says makes it easier to add quality advisors. "We're not blanketing the market," he says. "We're not following warm leads."

Having a unique value proposition will become increasingly important for smaller firms as they fight to stay afloat in the coming years. One of the selling points that has benefited Triad is the fact that it's been in the hybrid space for about a decade, longer than many similarly sized broker-dealers. "I think there will always be a place for the smaller firms that have specialties," Mettelman says. "But I think it will be difficult for the smaller, generic firms to survive."

On the high end of the scale is Ameriprise Financial Services, which debuted on the FP50 as the second largest in terms of total revenues ($2 billion), behind LPL Financial. (Ameriprise had declined participation in previous years.) A Fortune 300 firm that went public in 2005, the Minneapolis-based company saw its client assets, including wrap accounts, surpass $100 billion last year. It has $10 billion in total capital, $1.5 billion in its excess capital position and over $4 billion in liquid cash in case of a market disruption. Scale is obviously not a problem. Ameriprise has both money and financial flexibility.

"I think what the government realizes and what Wall Street realizes is that financial institutions do need strong capital," says James Cracchiolo, chairman and CEO of Ameriprise. "Those that have a weak capital base-or even the smaller firms that have a strong capital base-can be hit with a number of different vagaries in the markets. I think the retail consumer is going to want to work with companies that have a strong enough capital base to be in business for a long time."