Cover Storythird-party marketers by AUM did notchange in 2012.Kehrer Saltzman found <strong>LPL</strong> to be thelargest of the TPMs, serving 701financial institutions and reporting $70.4billion in AUM. Second isRaymond James, with 194 financialinstitutions and $33.7 billion in AUM.Third is Cetera, with 583 institutions and$29.6 billion (Cetera’s totals combinefigures for PrimeVest <strong>Financial</strong> andCetera Advisors <strong>Financial</strong> Network). Infourth place is Invest <strong>Financial</strong> with 125institutions and $27.5 billion AUM,followed by CUSO/Sorento Pacific<strong>Financial</strong> with 158 institutions and $17.1billion in AUM. The list is rounded outby CUNA, Infinex <strong>Financial</strong>, InvestmentCenters of America, IPI and EssexNational Securities.GO BIG OR GO HOMEIn today’s environment, there seemsto be consensus around the idea thatthis is becoming a scale business.“It’s becoming harder for some of thesmaller third-party providers to provideall the services and technology, and todeal with the increased regulation fromDodd-Frank,” says White. He notesthat some seven or eight TPM firmshave disappeared since 2007.The bigger TPMs, not surprisingly,agree. “It will take TPMs with veryrobust platforms and very deepoperations to grow and succeed in thisenvironment,” says <strong>LPL</strong>’s Comfort.“That means it will largely be goodfor the bigger players.” He adds, “Asfinancial institutions demand moredepth and breadth and capabilities,they will shift from current providersto a TPM that has all those things. Inthe last year a number of credit unionshave moved from their current TPMto <strong>LPL</strong> because they want to go to thenext level and wanted a TPM with theadvantages of scale.”Then, too, he says, those banksand credit unions that have theirown broker-dealers are facing “painpoints” like added regulatory burdenand compliance risk, and the need toupgrade technology in order to remaincompetitive. That and pressures onprofitability, he says, are “going to leadinstitutions that five years ago said‘we don’t need a TPM’ to say, ‘we don’tthink it makes sense to have our ownbroker-dealer anymore.’”He reports that <strong>LPL</strong> has several suchinstitutions currently talking withthe firm, some “in the final stages” ofreaching a decision to outsource theirinvestment operation to the company.‘This is a whole new area of growth andwe see it as a big opportunity,” he saysenthusiastically.Indeed, the biggest recent example isthe decision in March by Regions Bankto turn its program over to Cetera.(Cetera also picked up the programsof two other big regional banks, ZionsBank and East West Bank, last year).“We do believe that this year willsee a lot of independent banks andregional banks go to outsourcing theirinvestment programs,” says CatherineBonneau, president and CEO of Cetera<strong>Financial</strong> Institutions. “Regions Bankwas a good example of this.”Bonneau said that Regions Bankhad once bought the investmenthouse Morgan Keegan, but sold it toRaymond James last spring. The bankinitially began to set up an in-housebroker-dealer, but then made a strategicdecision to outsource to Cetera. Shesays of that deal, “Speed to marketwas a big driver of their decision tooutsource. If they had tried to buildtheir own broker-dealer, they would notbe where they are today. Negotiatingall the technology and the financialadvisor contracts would have taken alot of time. We brought in advisors—it’s an enormous recruiting drive withclose to 80 dedicated advisors year todate—and of course the technology isgood to go. We and Regions Bank aremoving ahead of projections.”John Houston, managing directorof Raymond James and director of itsfinancial institutions division, sees thewhole field when looking for growthopportunities. “Our biggest growthover the past 12 months has been newprograms at banks that had none,” hesays. Banks with in-house programsgoing to outsourcing was second.“Currently most institutions that joinus are looking to upgrade the serviceand the breadth of their services, whichmeans they’re usually coming to usfrom a smaller TPM or an independentinvestment program.”Number of <strong>Financial</strong> Institutions (end of 2012)701446277 242194 191 164 158 12526<strong>LPL</strong><strong>Financial</strong>InstitutionSvcsCeteraAdvisors/PrimeVestInvestmentCenters(ICA)CUNABrokerageRaymondJamesInfinex<strong>Financial</strong>GroupInvestmentProfessionalsCUSO/SorrentoPacificInvest<strong>Financial</strong>EssexNationalSecuritiesSource: Kehrer Saltzman & Associates