With Schwab [and maybe Fidelity] as custody partners, NFP is positioned to make a run at the hybrid market
If NFP IndeSuite catches on, the success could make up for some struggles on the roll-up side of the business
NFP, a once high-flying roll-up, is shifting strategies to focus on creating an advisor-friendly broker-dealer through its subsidiary, NFP Securities.
NFP Securities recently announced a major foray into the hybrid advisor market: a new platform, NFP IndeSuite, that offers a single login for commission and fee business.
James Poer, president of NFP Securities Inc., said the company has undergone a vast evolution, adding that he thinks of the company more as NFP Investment Services than as NFP Securities, denoting more than a “classic” broker-dealer. “We have expanded our markets.”
The strategy shift could be seen as the white flag of surrender for the roll-up’s original business model. NFP, which went public in 2003, saw its earnings drop from $54 million in 2007. In 2009, it had a net loss of $493.4 million, on revenue of $948.3 million. The company has adopted a turnaround plan that included selling some firms, restructuring compensation and recruiting more fee-based advisors – such as with NFP IndeSuite. See: NFP found profitability but shed firms and office space last quarter
The stock closed at above $14 a share yesterday, up from about $8 a share at the beginning of the year.
Poer, who became president in June 2008, a tough time for any financial company, comes from the asset management side of the business. He was vice president of NFP Securities Advisory and Investment Services before becoming president. Before joining NFP in 2003, he was director of advisory services for two of AIG’s registered investment advisors.
Fidelity may join platform
NFP had been considering a hybrid platform for about four years, but it was after Mr. Poer became president that the company ramped up the effort.
NFP IndeSuite has already signed on Schwab as a custodian on the platform. The company is also talking to Fidelity, according to Poer. NFP clears through Fidelity’s subsidiary, National Financial Services.
NFP is not in discussions with TD Ameritrade at this time, Poer said.
Less than 50% of the 1,700 advisors in NFP Securities are with firms acquired by NFP. The rest are with membership organizations such as Partners Financial. NFP IndeSuite, Poer says, is likely to appeal to a broader market. He says the company is talking to advisors whose businesses are 60/40 fee/commission, up to 80/20.
Schwab talks up the platform
Schwab is also talking up the platform to advisors and potential breakaways. Schwab, which does not have an internal solution for hybrid advisors, is putting resources this year into serving the market; the partnership with NFP is one example of that.
“Enhancing our ability to serve hybrid advisors is a key priority this year,” said Lindsay Tiles, director of corporate public relations. Tiles said the company does not disclose its financial arrangements with IBDs, but that they do not involve revenue sharing.
Schwab and NFP are touting the platform’s single sign-on through an integrated dashboard called AdvisorComplete.
“On other platforms like this you have to toggle back and forth,” Tiles said.
Poer said that advisors on the platform will be served by a dedicated NFP service team, which will field advisors questions on both the broker-dealer and asset custodian sides.
IndeSuite includes portfolio management, trading, reporting, compliance and back office capabilities. “Envestnet helped us build the asset management component of the platform – it is the alignment of our technology and theirs that empowers the platform,” Poer said.
Long list of competitors
NFP Securities will begin bringing advisors onto IndeSuite in the second quarter, a spokeswoman said.
She also said fees for IndeSuite are built into the platform and the economics depend on that advisor’s business profile and would vary on a case-by-case basis.
“We believe, however, that leveraging NFP IndeSuite’s scale and technology will give advisors a very cost-effective way to run their business,” she said.
Chip Roame, managing partner, Tiburon Strategic Advisors, agrees that NFP is transforming itself into an advisor-friendly IBD aiming to appeal to a broad swathe of advisors, but especially the hybrid market where most of the growth is expected to come.
Roame laid out the competition in the market:
- LPL, Raymond James and a few other independent broker-dealers that are perceived to be a cut above others.
- Custodians, including Schwab, Fidelity and TD Ameritrade. Schwab is forming relationships not only with NFP but other broker-dealers, as is TD Ameritrade. Fidelity offers dual relationships with its clearing firm, National Financial Services.
- Some boutique firms, such as High Tower Associates and Xeos.
Who has the secret sauce?
NFP Securities is a respected player, but the market is wide open, say observers.
“Everybody and their mother is going after breakaway brokers,” said Mark Hurley, CEO of Dallas-based Fiduciary Network. “I haven’t seen anybody come up with the secret sauce yet.”
Roame agreed. In comments via e-mail, he said, “The hybrid space is the coveted middle ground these days. Frankly, the fee-only financial advisors have far more assets and their AUM growth is faster, but the potential flood into the market is into the hybrid space, specifically the potential of thousands of break-away brokers from the wirehouses.
“James Poer is a savvy business executive and has as good a chance as anyone to win in this space.”