When Rehmann Financial announcedin March that it was moving roughly $2.5 billion in client assets to Royal Alliance, it marked more than just a significant business pickup for the New York City-based broker-dealer. It was also a sign of redemption for the entire Advisor Group network of broker-dealers (formerly AIG Advisor Group), which includes Royal Alliance, SagePoint Financial of Phoenix and FSC of Atlanta.

After a year of losing advisors and assets, the network is finally adding substantial value with Rehmann. Ultimately it was a first step toward validating something Advisor Group chief executive officer Larry Roth told Financial Planning in an interview last August: Despite the bruising it took from its affiliation with a corporate pariah like AIG, the network was back in business and ready to begin growing again.

DUAL BUSINESS

Arthur Tambaro, executive vice president of Royal Alliance, says that Rehmann is bringing something "relatively new" to the broker-dealer with its integrated accounting and advisory businesses. Essentially Rehmann has used its relationships in the CPA industry to provide wealth management services to accounting firms.

"Those accounting firms will hand their high-net-worth clients to the Rehmann advisors to invest and manage their assets," Tambaro says. "In the past, firms have tried to get accountants to handle people's money and that has not proven successful."

Fred Schaard, president of Michigan-based Rehmann, believes that the firm's dual business setup gives it traction in the accounting world. Because many investors have relationships with multiple financial professionals, they lack a cohesive plan. Schaard often finds that clients are looking for one firm to take care of everything.

"We see ourselves as having cracked the code of the accounting paradigm," he says. "We don't segregate the parts of the company. We don't put things in silos. We combine the [accounting and financial] services and offer them as one."

Because of this integrated business structure, transparency is paramount to the Rehmann service model, Schaard adds. Clients need to see what they are paying for-and to whom they're paying it. "This allows us to demonstrate our objectivity to our clients by showing them we don't receive part of the transaction costs or soft dollars from investment managers," he says.

ROYAL TOUCH

Two of the biggest selling points for Royal Alliance are its technology and open architecture, Tambaro says. The Advisor Group invested more in technology in 2009 than it had in any prior year, according to Roth, although the firm does not make these figures public. He expects the company to spend even more in 2010. Projects include a new fee-based advisor platform that is scheduled to be rolled out this summer.

But it's the open architecture and the ability to provide clearing with multiple custodians that ultimately drew Rehmann to Royal and away from Triad Advisors, which had served as its broker-dealer for three-and-a-half years. Specifically, it was Royal's relationship with Pershing that was the big allure for Rehmann. Schaard calls Pershing a "very good custodian and investment transaction facilitator" for high-net-worth clients, individual bond inventories and research, international investment alternatives and non-resident alien business.

When Rehmann decided to make a move, it looked at a few regional firms, as well as some bigger names. But Royal had the strongest alignment with Pershing, Schaard says.

There was one other key selling point: Because Rehmann had once been with FSC, it was already familiar with the Advisor Group. "We really like their executive team, especially Larry Roth," Schaard says. "We feel comfortable about the direction he is leading them in. Then you add to that their operations, compliance and technology-they just won us over."

But there is some confusion about what actually led Rehmann to jump ship to Royal. Nathan Stibbs, senior vice president of Triad, who helped recruit Rehmann, indicates the decision to part ways was made by Triad, not Rehmann. He says that Triad had approved Rehmann's use of Pershing; in fact, some of the firm's advisors already use Pershing and Fidelity, along with Schwab and TD Ameritrade. Stibbs argues instead that there was a difference of opinion about the future direction of Rehmann, but declined to elaborate.

"We made the decision that Rehmann was probably no longer a good fit for us," he says.

Schaard acknowledges that Triad allowed Rehmann to move one office to Pershing, a Chicago affiliation with a small book of business. However, he says that Triad denied Rehmann's request to use Pershing throughout its offices. Schaard and Stibbs both say the split was "amicable" and that Rehmann left on good terms. As of mid-April, Rehmann had transferred more than 90% of its business to Royal.