Firstrust Financial has cracked the code of collaborating with a community bank

March 1, 2011 — 6:10 AM UTC by Brooke Southall


Brooke’s Note: Most RIA firms don’t have trouble attracting talent. But they may have to pay more for it if what is happening in the IBD market is any indication. This article and its companion, Pershing study: Why the IBD talent market is headed for trouble and what might reverse the trend point to a deeper industry problem (and offers rays of hope) that underscores the strength of RIAs but also serves as a warning sign that the reservoir of advisory talent is finite.

Like many IBDs, MetLife Securities has been working on the question of finding, training and keeping registered reps. When it signed on a big advisory firm yesterday, it may have gained a new strategy for doing so.

The big New York independent broker-dealer supplanted AXA as the affiliated IBD for Firstrust Financial Resources LLC, a Philadelphia-based firm with 17 advisors and $600 million of assets under management. The deal was announced yesterday. Firstrust focuses on mass affluent clients with between $250,000 and $1,000,000.

Replication nationally

Firstrust uses its connection with a community bank, Firstrust Bank, to provide a training ground for new recruits and as a source for referrals. It’s a strategy it believes can be replicated nationally.

Adam Sherman, CEO of Firstrust Financial, says that getting started as a rep in the advisory business has always been difficult but that the level of sophistication expected from an advisor today versus 20 years ago is night and day. This has created high barriers to entry.

“What 50 year-old is going to take a device form a 23 year-old?” he asks.

The close ties with a community bank helps bridge that gaps, he says, because he can put a young trainee in a bank branch for 12 months to work on the basics of asset allocation and other fundamental concepts with clients.

Firstrust receives about a third of its business through referrals from the bank, which has 25 branches. Virtually all of those referrals are of the mass-affluent variety.

Firstrust had used AXA for 25 years and has been owned by Firstrust since 2006. A big reason for the switch was that it focuses on selling life insurance and variable annuities — two areas where MetLife has a strong brand. MetLife has about 10,000 reps nationally.

Blueprint for collaborative success

As part of its discussions, MetLife let it be known that it was interested in utilizing the blueprint of working closely with community banks that Firstrust has refined.

“The whole industry is struggling with retaining and developing talent and community banks have clients that need service. MetLife needs to get reps in front of prospects,” says Sherman.

He added that his firm and MetLife have yet to formalize a deal but that the big insurer may pay royalties or other fees for assistance in implementing the growth concept nationally.

A Pershing study recently published, Race for Top Talent II, paints disturbing picture of how little advisory talent is being developed and how this is forcing firms to desperately raid each other’s chicken coops. LINK

MetLife is paying attention to this staffing issue in other ways, too – largely by addressing retention, according to Jessica Ong, spokeswoman for MetLife.

“We have invested heavily in the last year on practice development and practice management,” in hopes of retaining more reps, she says.

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