A growing shift to fee-based business appears to be cramping short-term revenue growth at one of the nation's largest broker-dealer networks.
National Planning Holdings on Thursday reported record revenue of $967.7 million for 2013 -- an increase of 15.1% over 2012.
Yet total product sales at the Santa Monica, Calif.-based company jumped even more sharply, rising 23.6% to $20.5 billion. The company said revenue growth fell short of product sales increases because an increasing advisor shift to fee-based business caused revenues to fall over the short term.
"When a commission-based rep converts his book to fee-based, there is a short-term impact on revenue," explains Rob Dearman, National Planning's senior vice president for advisory practice and platforms strategy. The advisor gives up upfront commissions of 4.5% to 7% for the ongoing advisory fee of around 1%, he says -- adding that "the advisory billing schedule is typically quarterly, so they forgo revenue for about 90 days until the first cycle."
SLIGHT INCREASE IN REPS
The network's total number of representatives edged up by four to 3,544 in 2013; the network had lost 96 reps between 2011 and 2012.
The broker-dealer network -- an affiliate of Jackson National Life Insurance -- includes National Planning as well as Invest Financial, Investment Centers of America and SII Investments. When those firms' numbers were aggregated, the company ranked No. 6 in last year's FP50 ranking of independent broker-dealers.
Revenue had grown a more modest 6.3% in 2012 over the previous year.
Dearman chalks up much of the company's current momentum to investments in new technology platforms for advisors -- which, he says, increase revenue as well as efficiency for the advisors.
The independent B-D is planning to launch a new advisor dashboard in early 2014, with another release slated for later in the year featuring client-facing tools. "We're building technology for advisors because we want to fuel their growth," says Dearman.