Investors Capital Holdings CEO Speaks About His Company

| About: Investors Capital (ICH)

On October 8, The Wall Street Transcript interviewed Theodore E. Charles, founder, Chairman of the Board, President and Chief Executive Officer of Investors Capital Holdings, Ltd. (ICH). Key excerpts follow:

TWST: What is Investors Capital?

Mr. Charles: Investors Capital Holdings, Ltd. (AMEX:ICH) of Lynnfield, Massachusetts is a diversified financial services holding company that operates primarily through its independent broker/dealer subsidiary, Investors Capital Corporation (Pending:ICC), to provide premier service, support, technology, fee-based asset management, and practice management services to top-producing registered representatives to help them exceed their clients' expectations. The company's business units include Investors Capital Corporation, Investors Capital Advisory Services, ICC Insurance Agency, Inc., Eastern Point Advisors, Inc., and Investors Capital Holdings Securities Corporation.

TWST: Tell us about the history of the firm and organization.

Mr. Charles: The firm was founded in 1992. I founded it, essentially, with my own money. I felt compelled to start my own independent broker/dealer because I wanted to give registered representatives an opportunity to operate in a truly independent environment, free from product bias. In 1994, we formed the ICC Insurance Agency. In 1995, we formed our advisory arm, Investors Capital Advisory Services. In 1997, our representative force doubled. In 1999, we had $15 million in annual revenue. Today, that number is approaching $100 million, so we're growing rather rapidly, but in a controlled and responsible fashion. In 2001, we completed our initial public offering. Then, in 2002, we opened up our investment center model, where representatives from wirehouses or regional firms could work in an environment that is similar to the one they had prior to going independent. They didn't have to change their entire business model. We presently have several of these throughout the United States and they have been profitable. In 2002, we also opened our Investment Banking division. Moving ahead to 2007, we were the only independent broker/dealer that offered our representatives access to a health benefits plan. In early 2007, our fee-based assets under management reached $514 million. We hope to be at $1 billion by the end of this year. We are also introducing a deferred compensation program, which again is somewhat unique for an independent broker/dealer. We will be launching that at our annual meeting.

TWST: What are the corporate priorities? What are some of the items on your agenda to achieve over the next 12 to 24 months?

Mr. Charles: There are so many things we want to accomplish in the near future. One is to really build up our Business Development program so that we can organically grow our revenues by helping our representatives grow their businesses. We have a mentoring program in place so our representatives can learn how to succeed from our top producers and achieve greater success by learning from those who are where they want to be. We offer branding, marketing and public relations assistance. For example, our public relations department offers strategy and tips on how a representative can maximize her relationship with editors and writers to achieve positive exposure, get their name into their marketplace, and position themselves as a valuable resource. We also offer marketing assistance: direct marketing programs, an online marketing library, direct mail postcards and more, so our representatives can really get their name out in their communities and generate prospects that eventually become new clients. We offer pre-approved seminars and a seminar training program. We offer a leads program to our representatives that provides very deep data on high-net-worth consumers, even down to the types of cars they drive. We help our advisors by providing them with leads that are actually successful. We also have a representative message board for representatives to chat online about and resolve issues they are having in their practices. One thing we offer that most firms don't use is free legal review and assistance. We have in-house counsel and legal staff, so if you have a quandary with a client, we're here to help you interpret it rather than have you go out and hire an attorney when you may or may not know what a complaint or an inquiry may entail. In another words, you don't have to find your own attorney and do it alone. That is a very important issue today in this complex regulatory environment. We have a lot of educational and networking meetings. We have East and West Coast national conferences; representatives can choose which one they go to. We also have incentive trips for our top producers, so our top people can bond, meet their peers, network, and get/share new ideas. Our commissions are paid weekly, and we can actually pay them daily if the rep would like that. That is something new. People got paid every month when I started in the industry. Also, our payouts are extremely competitive, if not one of the highest in the industry.

TWST: Give us a financial snapshot of Investors Capital, the balance sheet and P&L. What are the strengths today? What items are you focused on for improvement?

Mr. Charles: The company is very strong. The last press release was issued August 27, 2007. We posted record revenues of $22.7 million for the first fiscal quarter; our fiscal year is March 31. It represented an increase of $3.1 million or 16% over revenues of $19.6 million for the comparative quarter ended in June 2006. We have increased our annual revenues every year since our incorporation in 1995, and that is quite a feat. The company posted a net income after taxes for the quarter of $466,000 or $0.08 a share, so we are pleased with the quarter. We are making investments in our home office staff, improving our technology, and boosting our practice management initiatives, while prudently managing our costs. As a result, there is a strong recruiting pipeline to go along with our strong performance numbers. Representatives like to be with a firm that is stable, growing and offers them the programs that we offer to help them achieve success as they define it. Our advisory fees, and this is a big shift for our company, had a record revenue surge, increasing 39.5% over the prior period. Our commission revenues, which represent a lion's share of the company's revenues, rose 12.9% to $19.7 million. Gross profit for the quarter rose $4.4 million to $16.8 million over the prior period. Our operating expenses have decreased by 25% because of lower legal, regulatory and professional expenses over the period. We are managing our expenses well, our compliance department is in good order and we look forward to a strong year ahead.