In 1979, the year it was established, Commonwealth Financial Network had gross revenues of approximately $43,642. Last year’s gross revenues were $265 million. Such an inspiring corporate story is usually authored by a great leader. Joe Deitch, the company’s founder and chairman, is most certainly a great corporate leader. A graduate of the University of Pennsylvania and Harvard Business School, Mr. Deitch possesses the types of traits found amongst leaders who build the best firms: intelligence, humility and passion.

How did you get into the securities industry? I had graduated college and spent a couple of years living in the Caribbean. It was time for a career and since I had no particular trade and no capital, I decided to get into sales. Through a circuitous route, I wound up in insurance and estate planning and that evolved into financial planning. It was a very natural evolution. This all occurred in the mid ’70s. It was during the birth of the financial-planning industry. Once there, I found myself attracted to estate planning and pension planning, and all of a sudden I realized “oh, this is financial planning.”

What inspired you to start Commonwealth? My previous broker/dealer had a lot of proprietary products. Eventually I came to understand the conflict of interest and how it was working against me. I was in my 20s and somewhat naive — I am being kind to myself here. I looked around and there was nothing out there that was quite what I wanted. So I started my own company and thought that there would be others like me who craved a wide spectrum of choices, a high payout (or what would have been a high payout at that time), and unbiased advice. When I say “high payout at that time” I mean that back then most advisors were either with a wirehouse or insurance company B/D and they really didn’t have that competitive element — it was unusual.

Upon starting Commonwealth, what would you consider your most significant early success? The most significant early success was staying in business despite my embarrassing lack of experience running a business and having never worked for a broker/dealer. I was the textbook case of what should have failed, but I didn’t know enough to know that. Eventually you hang in there long enough and you learn what you are doing, and you correct your mistakes. A memorable success was in 1985 when Inc. magazine ranked Commonwealth as one of the 500 fastest growing private companies in the country. I think we were at number 87 that year. We maintained that designation for the next two years. For three years in a row we were the fastest growing, and that that kept me going.

What were your biggest problems? The flip side of the high growth was that we were drawing revenues but I had yet to truly learn how to build a business with a strong integrated infrastructure. And then in the mid ’80s there were a number of environmental changes that had a huge impact on us. There was the Tax Reform Act of 1986 — that essentially did away with tax shelters — which was a big part of business back then and crippled the real estate industry. And then in 1987 it was the stock market crash. Fortunately, I had already gone back to school. I had gone to business school at Harvard because I had come to appreciate that I was the captain of the ship and I needed to get smart about the how to plot course and paddle the boat.

What were your survival techniques during the tough times? Lots of credit cards. This was a time when probably most people in the real estate business went bankrupt. Banks were going out of business. Banks don’t go out of business, and yet they were going out of business. It was pretty wild. During this most recent tech crash, a bubble burst but that was just some aggressive people in high-tech stocks or in NASDAQ stocks losing a bunch of money for the most part. Back then it affected everybody. Banks were going bankrupt. Insurance companies were on the skids. The problems back then were literally surviving.

Do you feel that a real estate shock would have a significant impact on the securities industry? Since almost everyone has real estate, it’s all interdependent. If that money evaporates then it creates a vacuum, and money will come out of the stock market to fill that vacuum. And, yes, I don’t think it will be pleasant if they crash as opposed to the proverbial soft landing. Crashes are generally bad.

Do you think that we are in a situation again where we could have a banking crisis similar to the mid to late ‘80s? I don’t know if we would have a banking crisis. I would hope not. One of the big differences now is that interest rates are so low. A lot of regulations have changed because of what happened back then. So there are safeguards in place. I do not think it would be anywhere near as bad as it was in the ’80s.

There are people who have all or most of their savings in their house, people who have a family and are in their mid 40s. And they have been trading up and up, having more and more equity, and now if all of a sudden that equity disappears that’s their life savings, most of their life’s savings, and that’s very difficult to say the least.

Why go independent? I have always thought that the independent approach was much more attractive for a trained advisor and an established advisor. Because if you are in a wirehouse and if you look at how the commission dollar is allocated, a lot of that commission dollar goes to training neophytes. It goes to advertising for your firm, it goes to some research, and it goes to higher management people who you may not need or like. When you go independent that money is freed up and that’s where the higher payout comes from. However, another huge reason to go independent is that when you are independent, and especially in a fee practice, you build up equity in your business. And it’s very easy to sell that business for a multiple of gross revenue as opposed to a small percentage with a wirehouse, and it’s very easy to frankly go into semi-retirement and maintain most of your income. It’s a wonderful model. That’s why for decades now the movement has been from the wirehouses to the independent, never the other way.

You had mentioned that building a sellable asset was one of the great reasons for going independent. Would you consider that the most compelling reason? As I step back and look at it individually I consider that one of the most compelling. My experience in speaking with advisors from wirehouses who either stayed there or came over is that building a sellable asset is not usually their reason. It is not an immediate concern of theirs; it tends to take a backseat to some other issues. People will leave because they finally realize that they are underpaid, or they don’t like being coerced to do things for the clients, or they don’t like their manager. Usually, there is some precipitous event, but if one were to put on [his] planning hat and step back I think it’s pretty clear that owning, building, and keeping the financial benefit of what you build is pretty powerful.

What sets Commonwealth apart from other independent firms? In the panoply of the universe of all the broker/dealers out there, there are really only a few firms that are truly independent, that are not owned by a product manufacturer. They are large enough to have a solid dependable service. There are also only a few firms out there that offer truly high-end service, and Commonwealth — for a number of reasons — happens to belong to both categories.

For example, Commonwealth has always been privately owned. Not only do we not have to worry about pleasing a product manufacturer, we don’t have to worry about our stock price. I am not a hired gun whose employment contract is keyed into next quarter’s earnings. We are 26 years old, we have the luxury of being able to think about the long term and focus totally on quality, and it is truly a luxury. We have a management team that has worked together forever, and we have eight partners. I have been here for 26 years, and the youngest one has been here for 14 years. We have a remarkable staff. Last year we were awarded by the Boston Business Journal as the best place to work among medium-size companies. It’s a fabulous team.

Relative to how we compare ourself to other firms, there is a matter of fit because an advisor can only be with one firm. We strive to be number one. We try to make everyone aware that we are here, but beyond that we want to be sure we let everyone know who we are. It’s for them to decide whether we are at the place where they want to be associated for a long time. It’s a marriage. It’s something that one does not go into lightly because in this business you can only be affiliated with one broker/dealer and it is a significant commitment to transition from one to another here. You are not just moving yourself. You are moving all of your clients. So it’s not something that anyone does lightly and we try our best, let people know exactly who we are, and then the decision is up to them.

We also offer what we call “The Uncommon Guarantee.” We feel so confident that this is the right move that if someone should change their mind in their first year, we will actually pay all the transition cost out up to a total of 10 percent of their trailing gross. We actually turn down about a third of the people who want to join us.

Very few people — very, very few people — leave us, but that guarantee is a way to let people know how confident we are in the services we offer. And frankly it’s also a compliment to our home office staff to know how proud we are of them and how sure we are that they will continue.

And what kind of rep would be right for your firm? You say you turn down about a third of the applicants. What are you looking for? What are you not looking for? We are looking for a nice person, who plays by the rules, does an above-average amount of business, and very much cares about quality, both for [his] own practice and for the clients. It’s a marriage, and Commonwealth, in addition to being a wonderful business, is a wonderful community as well. We are very protective of the community and the culture that we have built. It is very supportive and nourishing. It nourishes us financially and psychologically, and while it’s nice to grow you always have to ask yourself at what price. We are always looking to add people who are going to make this a better place. We have no interest in bringing on people who will diminish what we have already built.

We love people who are demanding. We see ourselves on the same side of the fence as the advisor. We only make money as a percentage of their fees and commissions. We don’t have the conflict of interest that most other firms have. And when they are demanding I don’t mean yelling and screaming, I mean when they are saying something could be better, we love that, that’s feedback, that’s advice, that’s brainstorming, it’s the ideas. We always want to keep getting better.

What are your goals for Commonwealth? Always better in every way. That happens to be our mantra here. Literally every single department is focused on being the best in the industry at what they do. The people that we attract here at the home office love that. Imagine you are a professional football player and you go to work on a team that wanted to be champs, compared to a team that just wants to finish the game and go home. We want people who know this is their stadium. This is where they get to show their stuff.

Would you consider expanding internationally? We certainly looked at it, but there is enormous opportunity here in the United States. When you go outside the U.S. you are subject to all different regulations for each country. There are over 600,000 registered representatives in the U.S. There are approximately 200,000 within our target market. With 1,000 advisors we have more than enough room to grow within our market.

What do you think about privatizing Social Security? On the surface it makes total sense to give people control of their retirement and their own contributions. The returns from Social Security to date have been anemic. Why is it that we rankle at the suspicious results of the Teamsters Pension Fund but not of the government? On the other hand, can you trust everyone to invest their money intelligently? What if some people abuse it and the government then has to take care of them anyway? I think a very simple approach would be to create some parameters that have safeguards. For example, you can do the 60/40 stocks and bonds, that’s a parameter. You can have other types of parameters and then within those allow much more flexibility. Yes, I think the system can be improved upon.

What factors do you think are impeding the growth of the securities industry, if any? The securities industry is doing just fine. There are pockets where the pendulum has swung too far on certain regulatory areas. Some of it was a reaction to 9/11 with a very hastily passed Patriot Act. Some by various agencies as they try to avoid embarrassment at the hands of Mr. [Eliot] Spitzer, who, by the way, I think has been a very positive force. But I think the pendulum has swung too far, and pendulums swing back.


VOL. 3 / ISSUE 6

Feature Story

With NASD arbitration under attack, Katherine Vessenes, on behalf of Broker Dealer, interviewed four industry experts with extensive arbitration experience, for an insider’s look at what really goes on during arbitration.


Advice to firms from a recruiter’s perspective on how to produce effective recruitment marketing kits. Specific dos and don’ts from a veteran in the field.


Reporting on security events that have affected national firms and are scaring smaller ones, James Bernstein describes the security situation in the financial industry as a whole.


Email archiving is a necessary part of running a compliant brokerage firm. The author gives a detailed primer on how to pick the right archiving system for your firm, which can save you money and time, and help you avoid legal issues down the road.


With so many high-tech security systems and so much encryption software being purchased and implemented within large and small firms alike, confidential data still seems to find a way to get in front of the public eye. In his article, Matthew Wein discusses simple preventative steps that can be taken by anyone regardless of their technological background to protect their important data.


Takes the reader on a historical passage through the birth of the largest financial trading institutions in the world today, and shows how coffee played a pivotal role in their creation.


Using employment statistics and proprietary trends disseminated from his employment website, he analyzes the financial employment situation from 9/11 to the present.


The owner of, explains the power of staying personal with clients. He touches on new technologies that offer easy-to-use methods of enhancing client relationships.

The Lookout

Chief Executive Officer and founder of Common-wealth Financial Network answers questions on his early beginnings in the financial industry, building a successful firm, his corporate culture and the future direction of his firm.

A Manager´s Guide

An additional 10% in production from your reps is achievable and less expensive than recruiting additional producers. Steve Drozdeck explains a few steps on how to increase the revenues of producers you currently manage.


Uncovered by most of the financial press and trade publications is the plight of the small firm and the regulatory environment. Without pulling any punches, Rogan talks about the small firm side of the story.


New Compliance regulations and coverage of compliance conferences - by