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Balancing Brokers and a Book

Imagine working for a branch manager who is so busy with his own book that he's rarely around when you need him. Even worse, he spends the branch's marketing budget lavishly on himself and competes against you for customers--cherry-picking the best clients when account distribution time rolls around.And he does this all with the tacit approval of his firm.These are the kinds of conflicts that can

Imagine working for a branch manager who is so busy with his own book that he's rarely around when you need him. Even worse, he spends the branch's marketing budget lavishly on himself and competes against you for customers--cherry-picking the best clients when account distribution time rolls around.

And he does this all with the tacit approval of his firm.

These are the kinds of conflicts that can occur when a branch manager is also a producer, according to brokers who have worked for producing managers. If you are thinking about going to work for a producing BOM, they say, make sure you ask some tough questions.

Ask About Accessibility "I've had an experience where basically we were lucky if the branch manager worked 40 weeks out of the year," says Keith Krause, now a financial adviser with Salomon Smith Barney in Frederick, Md.

In fact, Krause says he joined SSB in June 1998 partly because his manager is just that--a manager. "I have a nonproducing manager here and his full-time objective is to make me a better producer," he says. He's around when Krause needs him and offers guidance when asked.

But Krause is aware of some horror stories. One producing manager he heard about took "unfair advantage" of his visibility in the office to sign a new client--the owner of the building where the branch was located. "A producing manager is going to take that account, but a nonproducing manager is going to delegate that to one of his brokers, which is only fair," he says.

In short, Krause's exposure to producing BOMs has made him somewhat cynical. He thinks other brokers should be just as cautious. "One of the things you should ask a producing manager is how much time he spends on his book, and how much time he spends being a manager," he suggests.

Krause's friend agrees. "Know what you're getting into," says Legg Mason broker Phil Berkheimer, whose office is in the same Frederick, Md., building as Krause's SSB branch. "Understand what the manager has to deal with and don't be too tough on the guy. He's got a tough job just establishing priorities."

Berkheimer knows what he's talking about. He was a producing manager for more than 15 years before returning to production full time seven years ago. Today, Berkheimer works for a producing manager. Although he has no complaints about his current manager, he has some harsh criticism about the practice.

"When your primary income is derived from production, that's where most of your time is going to be spent," Berkheimer says. "And managing the branch office is hardly ever the manager's primary source of compensation. So, the responsibilities that should be paramount--managing the office--almost always become secondary."

Consider These Counterpoints Of course, for every broker who complains about producing managers, there is another broker who has a glowing experience to share. For example, a Merrill Lynch financial consultant in the Southwest says his BOM is a "phenomenal" supervisor and motivator despite the fact that he is also a million-dollar producer.

"The fact that my manager is also a producer helps me because I can go to him and say, 'Look, here's what's happening and here's where I'm having problems,'" the Merrill rep says. "But if it has been 10 years since he's been out in the field, he may not be able to relate to what I'm talking about. If he's out there pounding the pavement, he'll have a better feel."

Likewise, prying marketing money loose from a nonproducing manager can be tougher than asking for funds from someone who is producing. "I know some brokers who work for nonproducing managers and these managers are all about the bottom line and the expenses," the Merrill broker says.

What about fears that a producing BOM will grab the big accounts or spend the lion's share of the branch's budget on themselves? "There's no way my manager would even think he could pull that off around me," this producer says.

Why? Because any producer with a decent production number carries enough clout to prevent that from happening, he says. "My experience has shown that people who complain about account distributions and things like that are underproducers anyway," he says.

Larry Silver, director of marketing at Raymond James in St. Petersburg, Fla., agrees. If a producing branch manager took advantage of a marketing budget, the backlash from the rank-and-file would be swift and severe, he says.

"They have to account to their own brokers because the brokers know that marketing money is there for them," Silver says. "They're not going to keep good brokers working for them if the money isn't being spent to help the brokers grow their practices."

Almost all branch managers at Raymond James are producing managers with "very small production numbers," Silver says. "We want them to be using the same software on their workstations and experiencing the same products, so they can empathize with their sales force."

Silver says the firm has issued some strict corporate policies. For example, Raymond James does not allow branch managers to take walk- or call-in accounts. While declining to offer specifics on BOM pay, Silver says the firm's managers are compensated based on the branch's production growth and profitability, so skillfully managing the branch is their key concern.

Brokers who are considering working for a producing manager should ask lots of questions about account distribution and the like, Silver says. "If the branch manager is focused on the branch's bottom line, he's going to do what's best to get a client in the branch and retain them long term," Silver says. "That means putting the client with a broker he or she feels most comfortable with."

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