Stephens Inc. Sees Gain Of 105 Stockbrokers In 2004

Largest Broker Dealers
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The majority of brokerage firms in Arkansas saw a slight increase in their number of stockbrokers in 2004, but not enough to jockey their respective positions into any significant gains or losses on this year's Arkansas Business list of the state's largest broker dealers.

In fact, the list's top five remained virtually unchanged, aside from Little Rock-based Stephens Inc. reporting the gain of 105 registered representatives, which brings the firm's total to 508. Edward Jones of St. Louis, with 200 registered reps, remained a distant second on the list.

After an examination of Stephens' numbers over the last three years, one might accuse the firm of flip-flopping. The list in 2002 showed Stephens with 515 representatives before dropping 112 of them to 403 on last year's tally. That most of that lost has been regained is attributed by company spokesman Frank Thomas to the growth in two of the firm's domains.

"You could say the increase is a direct relation to the expansion in a couple different strategic areas," Thomas said. "Our private client group and the fixed-income institutional sales areas have seen concentrated efforts for growth during the last year or so. I believe the increase is the result of our need to improve our services in both of those strategic areas."

Thomas said Stephens' drop-off in numbers of representatives reported on last year's list was the result of the firm no longer managing Nations Funds, a mutual fund.

Edward Jones, No. 2 on the list, saw an increase of nearly 40 registered reps, which a company spokesman said was part of a national push for growth last year. The plan was successful, as the firm's reported net worth jumped from $649.1 million to $715.5 million, a growth of more than 10 percent.

Nos. 3-5 on the list remained consistent with last year, with Little Rock's Crews & Associates Inc. at No. 4, which added only 20 registered reps but managed to stay ahead of No. 5 Morgan Stanley, which has 99.

The only firm on the list to drop in its number of representatives yet move up the list was Rogers-based Arvest Asset Management, which went from 75 last year to 68 and a No. 6 ranking.

American Express Financial Advisors Inc. dropped from No. 6 to No. 7 by losing 20 agents in Arkansas (85 to 65) and nearly $50 million of its net worth. A company spokesman declined to comment on the decreases, but did say that American Express was "in stable condition and is now poised for more growth."

On the flip side of the coin, Morgan Keegan & Co. of Memphis saw a growth from 53 registered representatives to 61, but dropped nearly $60 million in net worth while staying at No. 8 on the list.

Oppenheim, a division of BOSC Inc. of New York, remained in its No. 9 position despite dropping its Fayetteville location. A company spokesman said all but two of the Fayetteville representative positions have simply relocated to Little Rock, which drops the firm's total from 43 to 41.

Oppenheim's slight drop allowed Smith Barney Inc., also with 41 registered reps, to move into a tie at No. 9.

Not ranked were Merrill Lynch & Co. and Sterne Agee & Leach; both firms declined to disclose how many representatives they have in the state.

Wheeling and Dealing

The number of registered representatives in the annual list is constantly fluctuating. Sometimes there are expansions and cutbacks, but often broker-dealers simply move from firm to firm in search of a better deal.

Recruiting among competing firms has become a well-established practice in the last 20 years, according to Kathy Ridley, a spokesman for Morgan Keegan & Co.

But Andre Cappon, president of New York-based The CBM Group, said training beginning brokers still makes sense for large, established firms that have the time and money it takes to invest in the practice.

"It [also] requires patience since it takes years to recover the investment made," he said.

However, recruiting experienced brokers has the advantage of seeing almost instant results, according to Ridley.

"Good producers often have the advantage of bringing clients they've already established with them," she said. "They're also more apt to be more energetic in getting out there and seeking new accounts to help establish themselves with their new firm."

Cappon said recruiting also has its drawbacks. Some brokers become "chronic switchers" who actively seek out opportunities to jump from firm to firm for the sole purpose of earning sign-on bonuses. Another downside is recruiting a broker who has decided to "jump ship" because they have upset clients.

Cappon said training brokers is equally effective as recruiting, mainly because it enables the firm to be selective and pick precisely the types of trainees it wants.

"Home-trained producers also tend to be more loyal to the firm and more disciplined," he said. "[They'll be] more likely to respond to management direction regarding products to be sold, selling approaches and compliance."

Some downsides to training, according to Cappon, include the costs employers have to put out for licensing and orientation, and fact that only about one in four trainees is willing to stick with a three- or four-year training program.

Another growing trend in the industry is that more and more brokers are choosing to go independent, according to a study done by Cerulli Associates, a Boston research and consulting firm specializing in the financial services industry. Being independent can be attractive because of the larger payouts that independents can earn by not having to share profits with a big firm.

But just like having to decide between training and recruiting, going independent also has its downfall.

"When brokers decide to go independent, it's a reality check when they realize they're largely on their own," said Ridley "They don't really understand how much administrative work they're actually having to take on."