Thirty for Thirty Part III

PARTNERS & POLITICIANS

Tom James
These days, advisors and executives from everywhere along the spectrum of independent advice giving assume three things: that advisor practices and their partners are run as businesses; that advisors put the clients first, and that those clients deserve regular reporting from their advisor on what products and services they’re getting in exchange for their fees or commissions; and that advisors themselves have a number of options to choose from in the business platforms from which they can provide independent advice along a spectrum from employee broker to independent contractor to hybrid to full-blown independent RIA. It hasn’t always been that way, however, and for those developments which seem like givens these days you could do worse than to thank Tom James and the firm that his father, Robert "Bob" James, co-founded and that he himself joined in 1966 fresh out of Harvard Business School (he’d graduated Harvard College in 1964).

In fact, as an advisor you can hang your hat at Raymond James in a number of different ways—as employee, independent contractor, or RIA—and as of March 2010, there were 5,300 advisors doing so in the U.S., Canada, and overseas, serving 1.9 million customer accounts, and with total client assets of $233 billion. But there’s one principle that ties all those advisors together: putting the client first.

Raymond James Financial’s COO, Chet Helck, who runs the company’s Private Client Group, says "Tom has been an instrumental leader for 30-plus years," who created a platform "that results in stability and innovation," and which established "clearly defined accountability that separates people in the advice business from people in the product-selling business." One example of that innovation, Helck says: "calculating performance on every account in the firm," and the Client Bill of Rights which, among other items, promises a "trustworthy and competent financial advisor…clear communications…comprehensive statements and trade confirmations…[and] prompt error and complaint resolution." And this was first published and provided to all Raymond James clients in 1994. It still is. "Nobody else has this kind of disclosure," says Helck, who traces Tom James’s commitment to clients to "values, especially his father, a highly educated guy who started selling real estate to folks from the Midwest"—that’s why Raymond James is based on the West Coast of Florida, a traditional hotbed for Midwestern snow birds—and eventually financial advice to those same clients. "Bob James had integrity," says Helck.

James recalled in a March interview that he had to put his business skills to work immediately upon joining the company, but he didn’t rest on his laurels. He received his JD and eventually his CFP, served on the board of the SIA (now SIFMA) and on NASD boards. He became CEO in 1970, took the company public in 1983, and this month cedes that job to Paul Reilly, though James’s contribution to the company—and the communities in which the company operates, which James has always stressed to his executives— will continue. Speaking of Tom James and his legacy, Helck says that when it comes to folks who work for Raymond James and advisors who choose to affiliate with the company, "true leadership causes people to want to do things right, and it attracts people who want to do the right thing," As for clients, he notes that "indifference and fear keeps people from making the right decision; one of our main skills at Raymond James is education" that can dispel fear and inspire sound decision making.—James J. Green (JG)

Dale Brown
For the last 22 years Dale Brown has been working as a professional advocate for the advisory profession, first with the IAFP, then the FPA, and since 2003 as president and CEO of the Financial Services Institute. Brown observes that Americans have come to realize they need help to accomplish their financial goals. "Obviously I’m biased," he admits, "but I think the independent advisor who has partnered with an independent broker/dealer is in the best position to be that advisor of choice." In the seven years since its creation, Brown says FSI has achieved recognition and credibility. "Now the challenge is leveraging that credibility into real and meaningful influence on the issues that are important to our members’ business."—RFK

Joe Deitch
"One of my greatest strengths is my knowledge of how limited I am," says Joe Deitch without a hint of discomfort. "So I’ve surrounded myself with talented people who speak their mind and their views. If we make few mistakes, it’s because we hammer it out; we’ll debate until we arrive at a clear consensus," says the chairman of Commonwealth Financial. While he touts the long tenure and contributions of Peter Wheeler and his partners at Commonwealth who help him vet company strategy, Deitch is clearly the heart and soul of this independent broker/dealer which has made its mark by being "enormously clear about quality and community." That quality starts with the back office, where he notes that "we’re all incented in the same way; every single person in the home office has stock options; advisor satisfaction is a massive part of our bonus plan." Commonwealth’s vaunted practice management and wealth management competencies are nearly universally recognized, but he’s quick to cite now-President Wayne Bloom for "building the money management division." Then in 1989 Commonwealth started its practice management operations, run at first by Deitch’s late wife, a psychologist. "It was all about, at first, how do you build a team? Then I hired Joni Youngwirth." As for community, Deitch notes that "close to 60% of our home office staff is related" by blood or friendship, and that in interviewing for both new reps and staff, "we’re very vigorous, because we’re letting them into our house."—JG

Alan Greenspan
Alan Greenspan’s monetary policies during his 19 years as head of the Federal Reserve influenced the growth of the American economy and the long bull market, for which advisors and their clients are grateful. But did it also contribute to the financial meltdown? In testimony before the Financial Crisis Inquiry Commission on April 8, Greenspan said that "It was the global proliferation of securitized U.S. subprime mortgages that was the immediate trigger" of the crisis." While he acknowledged that he had made mistakes while at the Fed, he did not believe that his historically low short-term interest rates between 2001 and 2004 was one of them. Greenspan said that going forward there should be rules that "would kick in automatically, without relying on the ability of a fallible human regulator to predict a coming crisis."—MW

Ned Johnson
Edward (Ned) Johnson has been a fixture as head of Fidelity Investments for three decades. As chairman and CEO, the 79 year-old doesn’t look to be giving up his positions anytime soon at the largest mutual fund company, which also has loomed large among advisors through its RIA custody business, its TPA business, and its National Financial clearing arm. But Fidelity does "have a stated succession plan," says Jim Lowell, editor of the Fidelity Investor, although there’s "no doubt that Ned is still at the helm and still the visionary at the firm." After Fidelity’s president, Rodger Lawson, retired on March 31, Fidelity assembled a "committee of nine" executives, which includes Johnson’s daughter Abigail, instead of appointing a new president. Lowell says this "committee" is a sign that "Fidelity is internally, at the senior-most levels, debating what leadership is going to look like and how leadership is going to be defined in the near future."—MW

Ronald Reagan
The Great Communicator influenced the profession in multiple ways. His "Morning in America" and tax cutting approach helped bring Americans out of a malaise caused by hostage taking, oil embargos, a long bear market, and high inflation. The still-young profession of financial planning had become focused on tax avoidance, specifically tax shelters using limited partnerships. In our 25th anniversary edition in 2005, however, pioneering planner Ben Coombs recalled that "Volcker and Reagan breaking the back of inflation, and changing the tax code environment" was pivotal in the changes in the profession that followed. Let’s not forget that the 401(k) debuted in 1981, and that Reagan signed an increase in the payroll tax in 1983 (proposed by a commission headed by Alan Greenspan, by the way) to fund Social Security and Medicare. Yes, a tax increase from the patron saint of tax cuts that preserved government-sponsored retirement and healthcare.—JG

Todd Robinson
"It was never our intent to be the biggest, but sometimes the best become the biggest," recalls Todd Robinson of the early days of what is now known as LPL Financial. However, notes Robinson in a telephone interview in April marking a departure from his self-imposed press silence since he and his partners sold a 60% stake in LPL to a private equity firm in 2005 in a deal then valued at $2.5 billion, "the bigger we got, the more services we could offer." There was another advantage that Robinson and his partners brought in merging Linsco with Private Ledger in 1989 and building a B/D behemoth that as of year-end 2009 could count nearly 12,000 reps, $279.4 billion in brokerage and advisory assets, and a growing custodial platform for RIAs: "I started as a broker; [partner] Jim Putnam was a broker—that gave us a better ear because we had lived in their world; some of our competitors came out of the insurance and financial planning worlds—they didn’t appreciate the value of a good back office." Robinson says that he "stepped back" from LPL because "individuals are mortal, and we’d reached a size where we needed to institutionalize the company—and that’s gone well—everything seems to be going great."—JG

Franklin Delano Roosevelt
If you’re wondering why the 32d President of the United States should be considered, allow me to present just a few of his biggest accomplishments—no, not the WPA or CCC or TVA, but the SEC, the FDIC, the FHA, GNMA, and FNMA. No, not the New Deal itself, but Social Security. It was during FDR’s presidency that the Securities Act of 1933, the Investment Company Act of 1940, and the Investment Advisers Act of 1940 were passed. And it was in his failed attempt to coopt the Supreme Court by expanding its numbers that he won the legal right for the government to regulate the U.S. economy. Still unconvinced?—JG

Mary Schapiro
Since becoming SEC Chairman in early 2009, Mary Schapiro has had the enormous task of rescuing the embattled securities regulator from near collapse. After the Bernie Madoff Ponzi scheme and the failures on Wall Street, Schapiro has created new divisions at the Commission, instituted new rules, encouraged more collaboration among divisions, and hired people with a wider range of skills.

Schapiro told Investment Advisor in early April that the SEC continues to "push very, very hard" for a fiduciary standard for B/Ds and RIAs. "We’ve been working very hard in the House and the Senate, to mixed results honestly, to try to get that grant of authority to have a fiduciary duty across both categories of financial professionals. Until we have the legislation, it’s hard for us to get very much done" in harmonizing the rules for brokers and advisors.

Moreover, she says, the SEC’s "attention right now is focused on fighting for the legislative provision that would mandate a uniform fiduciary standard."

Schapiro says she’d also like to see the final financial services reform legislation include a self-funding mechanism for the SEC. While she says there are "a lot of great things" in the House and Senate bills, like bringing over-the-counter derivatives under regulatory scrutiny for the first time, Schapiro says gaps still need to be filled.—MW

(Read more of Melanie Waddell's interview with Mary Schapiro here.)

Marv Tuttle
Marv Tuttle’s long service as the executive director and CEO of the Financial Planning Association, and with that group’s predecessor organizations, gives him a tenure in the industry almost as long as this magazine’s. The biggest change he’s seen in that time is the attitude toward the profession from media, legislators, and regulators. Today, "consumers are feeling more and more comfortable that professional financial planning can be part of their lives...but we still have lots of work to do in making sure that access to financial planning…is afforded to a larger swath of the American public."—RFK