New Era Financial Advisors Inc. had stuck with its broker-dealer for about a quarter-century, through a span that included a merger and the company's acquisition by a bigger organization.

It was only after the broker-dealer was bought again — this time by LPL Financial Services Inc. — that New Era's leadership decided to look for an alternative.

"We knew the LPL model fairly well — in fact we had been recruited by them over the years," said Donald Warner, the chief executive of the Wayzata, Minn., firm. "We thought the acquisition could change [the acquired broker-dealer] materially."

In 2009, New Era joined Financial Advisers of America LLC, a San Diego independent broker-dealer that says it intends to never be acquired.

"We wanted to make just one more change in our careers," Warner said, "and this was it."

FAA's leadership was able to persuade New Era's owners to join their firm in part because their experiences mirrored those of Warner and his colleagues.

The four-year-old broker-dealer's CEO, Ken Johnston, and its president, Jodi Johnston (they are a married couple), knew firsthand of the disruption that a broker-dealer's acquisition can cause.

Several years ago, Jodi was a rep; her firm's broker-dealer was sold to SunAmerica Inc. in 1998. Ken's story is similar. He had little notice when, in 2004, LPL Financial acquired the broker-dealer firm where he was an executive.

Starting a broker-dealer from scratch was about "wanting to control your own destiny and being able to fulfill the promises you're making to other people," Ken Johnston said.

Backing up its plan to never be acquired, FAA's leadership said they are working out a succession plan. To be unveiled within the next few months, it includes putting together a board of directors to help ensure continuity, Jodi Johnston said.

FAA is approaching $3 billion of assets under management. Commissions more than doubled in 2010, and the number could double again this year, Jodi Johnston said.

The firm has about 200 advisers so far. But it could have many more, Jodi Johnston said. FAA evaluates reps based not just on their commission history or regulatory standing but also on factors like their personality and the breadth of products they recommend for clients.

"For every 25 that come in front of me, I probably say no to 23," Jodi Johnston said.

Pointing to the extensive brand damage financial firms absorbed during the financial crisis, the Johnstons said their top priority is assembling a roster of reps with strong character.

"I've said no to million-dollar reps more than 10 times because they were not good a fit for our firm," Jodi Johnston said. "One or two bad apples can destroy it for everybody."

If FAA's recruiting approach is understandable, it is also perhaps surprising given the number crunch in the broker-dealer field. A study released in February by Bank of New York Mellon Corp.'s Pershing LLC unit warned that broker-dealers' demand for investment professionals could outstrip supply.

The number of investment professionals, the study said, has remained largely unchanged at approximately 310,000 over the past few years. That's concerning, because many of them are approaching retirement age, and new talent is not expected to offset the decline in numbers.

Yet the report also had encouraging news for independent broker-dealers such as FAA. Just 2% of brokerage-affiliated investment professionals who produce $50,000 or more in annual revenue would target a wire house when changing firms. Nearly half preferred an independent broker-dealer, compared with 22% who would seek to join or start a registered investment adviser.

Jodi Johnston admits that FAA, as a boutique broker-dealer, faces a recruiting challenge. There is a widespread perception about small broker-dealers, which she said is inaccurate, that they lack some of the abilities of larger rivals.

Still, the firm has had a steady stream of prospects, she said, many of them from wholesalers and even reps with other broker-dealers. One of FAA's selling points — one that was critical for Warner — is that it will let reps keep their own RIA outside of the firm.

Another is its boutique level of service. An example: When reps approach the broker-dealer with a new investment product, FAA will take a serious look at that product, Jodi Johnston said. "We don't say, 'It's not from one our preferred vendors,' " she said. "Just because we haven't heard of it doesn't mean it's not a good product."

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