by Bruce Kelly and featured in Investment News
New York – In an effort to pump new life into its growth plan, GunnAllen Financial Inc. plans to launch a recruiting and advertising campaign by fall that focuses on the services it offers to registered representatives and advisers.
The moves come amid recent additions to, and revamping of, the Tampa, Fla.-based firm’s roster of executives – including hires from key competitors, such as Wachovia Securities LLC of Richmond, Va.
“We have great programs now, the depth and breadth of our platform,” said David Levine, senior vice president and director of national sales for GunnAllen. “The message, the identity of the firm, needs to be redefined and better communicated.”
As proof of the firm’s added strength, Mr. Levine cited a number of new hires, including last Tuesday’s announcement that Christopher Frankel, until recently a top executive with Sterne Agee & Leach Group Inc. of Birmingham, Ala., had been named chief operating officer.
GunnAllen has shown unprecedented growth in the recent past, growing to 900 registered reps last year, from about 200 brokers a few years earlier.
Last summer, the firm said that it was cutting ties with some brokers who had multiple knocks – or “yes” answers – on their compliance records.
Last spring, before it began its purge, the firm had 42 brokers – about 4.5% of its total – under heightened supervision. According to published reports, just 0.6% of Washington-based NASD’s 660,000 registered reps last year had three “yes” answers on their form U4s, the uniform registration forms for registered reps.
GunnAllen was No. 20 in the most recent InvestmentNews survey of independent-contractor broker-dealers and networks last year, with $135 million in gross revenue. One industry observer applauded the changes at GunnAllen.
“I’m impressed. A firm can absolutely recover from that if they’re disciplined, have a clear focus or a message, and a game plan,” said Larry Papike, president of Cross-Search, a recruiting firm in Jamul, Calif.
New General Counsel
He has recruited for GunnAllen in the past, he said, but hasn’t worked with the firm in about a year. Another recruiter, however, stressed that “time will tell” if the firm can overcome its history.“I hear that, and my feeling is that actions speak louder than words,” said Jonathan Henschen, a brokerage recruiter based in Marine on St. Croix, Minn. “Time will tell if they change their colors,” he said, adding that a clear positive is that the firm is bringing in quality management and improving its quality controls over its recruited reps.
In addition to Mr. Frankel, Gunn- Allen in June said it had hired as general counsel David Jarvis, a veteran of Wachovia Securities, who also worked with that firm’s independent-broker-dealer affiliate, Wachovia Securities Financial Network LLC, which is known as FiNet.
The changes in management are “part of the growth strategy,” Mr. Levine said. “We grew very quickly,” he said. “This is putting in a really good management team.”
And Mr. Levine pointed to the firm’s success in capital markets offerings and its fee-based advisory platform as two strong points.
“There’s just a range and a depth that I don’t think the Street yet perceives to exist at GunnAllen,” he said.
Mr. Levine said that the number of reps under special supervision has been cut in more than half, but he isn’t aware of the exact number.
“I think in the past, if we were too cavalier in accepting ‘yes’ answers. We’ve become much more strict about it,” Mr. Levine said. “But for people who are already with GunnAllen, it’s on a case-by-case basis.”
The firm has changed its recruiting targets and standards, and so far, that has paid off, Mr. Levine said.
“Right now, our goal is $250,000 in [gross dealer concession] and $25 million in assets, which is substantially higher than it was in the past,” he said.
Through last month, the firm had recruited nearly 60 registered reps, with $16 million in production, Mr. Levine said, noting that that was ahead of the firm’s per capita goal.
“Our revenues continue to grow, and our profitability has improved,” he said.
Brokers pass through two committees when joining GunnAllen, with the first looking at employment and regulatory history, and the second examining their production and business mix.
The process is “unbiased, and it’s strict – I would say much more so than it was in the past,” Mr. Levine said.
“You strip out their production,” he said. “You don’t take someone with ‘yes’ answers because they do over $1 million of gross” dealer concession.
Mr. Levine added that a “yes” answer doesn’t disqualify a broker right away, because it sometimes includes information about the rep that isn’t related to the financial services industry.
“You have to look at things with a degree of compassion and understanding,” he said.
A Wide Net
Mr. Levine said that about half of GunnAllen’s recruits come from wirehouses, while the other half come from other independent broker-dealers.
“The policy we have is, if the regulators say there’s a door open or there’s an issue, we’re going to close the door,” he said.
“We are looking to prove to the regulators that we’re ahead of the curve, and I’d like to think that over the past year, we’ve made significant progress demonstrating that,” Mr. Levine said. “It’s a greatly evolved GunnAllen Financial.”