Driven by a robust stock market and strong demand for mutual funds, annuities and other products, Financial Planning's 26th annual ranking of the Top 50 independent broker-dealers saw a median increase in revenue of 13.2%, with 13 of the firms on this year's list posting year-to-year growth of more than 20%.
Lincoln Investment Planning was the fastest-growing broker-dealer with a 63.6% leap in revenue. Lincoln was followed by Triad Advisors (50.2%), American Portfolios Financial Services (43.8%) and CFG/H. Beck (42.9%). All four firms are midsize B-Ds with 2010 revenues of less than $100 million.
But the next two fastest-growing firms are Top 10 B-Ds. Wells Fargo Advisors Financial Network's revenue jumped 40.9% to $434.2 million and Cambridge Investment Research - which was the fastest-growing B-D on last year's list with a modest 3.2% revenue rise - posted an increase of 36% to $339.3 million. Cambridge fell just short of the Top 10 this year, settling in at No. 11.
The industry turnaround is dramatic: Just three FP50 firms increased their top line last year, and the year before was only slightly better, with 11 firms reporting positive revenue growth. By comparison, 44 of the Top 50 broker-dealers on this year's list reported growth. Of the Top 50, six reported lower revenues and three firms were new to the list, meaning 41 firms enjoyed growth.
"Some of last year's strength resulted from the weakness of the two previous years," says Cambridge Chairman and CEO Eric Schwartz. "It's easier to post good numbers when you're coming back from bad years. As stocks continued to climb in 2010, recurring revenues from fees and trails received a huge boost. Also, investors' confidence rose as stocks came back, which helped reps acquire new assets."
It's likely that some of the money that had been tucked away in bank CDs found its way into investment products last year. It's also likely that continued economic uncertainty helped some B-Ds.
"Economic difficulties led to layoffs and retirements," says Art Grant, CEO and president of Cadaret Grant. "Those events in turn led to rollovers and repositioning assets." Money moving to rollover IRAs from 401(k)s might have wound up being managed by financial advisors affiliated with independent B-Ds, and the same is also true for buyout packages.
"In addition," says Grant, "there is disillusionment with wirehouses and their well-publicized troubles in the past several years. That presents opportunities for mainstream, conservative, planning-oriented advisors."
HOW THEY'RE RANKED
The FP50 is compiled by Financial Planning, which each year surveys independent broker-dealers about their annual revenues, as well as commission and fee revenue. They're also asked about total payouts, production of their reps, commissions and fee-based product details and other related information.
Industry giant LPL Financial, with 2010 revenue of roughly $3 billion, again tops the FP50. And Ameriprise, with revenue of $2.5 billion, again ranks as No. 2. The two giants each generated twice the revenue of Raymond James Financial Services, which ranked No. 3 with a bit more than $1 billion in revenue. While the very top of the list was unchanged from last year, there was a big shake-up was visible elsewhere in the rankings.
Commonwealth moved to fourth place from fifth, leapfrogging AXA Advisors. MetLife Securities advanced to sixth from seventh, passing Securities America. Wells Fargo moved into the top 10, improving to ninth from 12th, while Cambridge just missed, jumping four slots to 11th from 15th.
"For the past three or four years, we've been changing our culture so that it's not just focused on transactions," says John Brett, senior vice president of the MetLife Broker-Dealer Group. "We're taking a more holistic approach, which has provided the momentum for growth."
John Peluso, president of Wells Fargo Advisors Financial Network, credits his firm's growth to its "unique market position" - the company's resources combined with local business ownership, the reputation of the Wells Fargo brand, and the leverage gained by relying on a wide range of products and services.
In the new survey, no firm moved up more than four slots. Cambridge's rise to 11th from 15th place was matched by Waddell & Reed (to 16th from 20th) and American Portfolios (40th from 44th). Heading the other direction, Investors Capital lost the most ground, dropping to 48th place from 40th. Investors Capital, though, posted a 9.9% revenue gain in 2010. Six firms in the FP50 acknowledged that revenues fell last year, including double-digit dips at M Holdings Securities (-10.7%) and PrimeVest Financial Services (-12.3%).