Recruiting Deals

I have had an overwhelming response from Merrill FC’s - if you are at Merrill and need to know what your options are PM me.

if you are at Merrill and need to know what your options are PM me.

If anyone would care to place an intelligent post rather than a PM I would gladly respond.  As to ML FC’s decision being simply “stay or go”, it runs a little deeper at the number one firm as far as FC loyalty goes.  The retention package about to be offered will have to be reviewed and compared to the value that other firms are willing to place on the same book of business.  ML FC’s have a varying mix of business and product within their books and have to understand which firms it is more easily transitioned into a different platform.  Changing firms is a much harder process than most people will have you believe.  Most of us know FC’s that took the biggest check without asking the right questions or doing the research only to either be out of business or to never regain the assets or production they once had because the firm is a bad match.

A year from now it will be interesting to see how many stayed vs how many departed. But I would be most interested to see how many signed on at another wirehouse & collected a check vs how many went the independent route.

I think that a year from now we will see the majority of the top third of Merrill FC’s at different firms.  Most of these FC’s have been with Merrill for most if not all of their career.  The number that will go independent  in my opinion will be low due to the business model that Merrill FC’s are taught. 

I think that a year from now we will see the majority of the top third of Merrill FC’s at different firms.  Most of these FC’s have been with Merrill for most if not all of their career.  The number that will go independent  in my opinion will be low due to the business model that Merrill FC’s are taught. 

And where are you suggesting ML reps go lol…MS…UBS…LMAO…ummm in a week or two there will be about 2 firms left…jump now and get bought next month!

I believe the retention package will be made attractive to the first and second quintilers, and just ok for the 3rd quintile. The fourth and for sure the fifth quintilers will be dead in the water.

You could make that point.  However, the truth of the matter is that I started my career @ Merrill and still have many friends there.  The basis for my comment is that if your current firm offers you 50% of your T12 and you have to sign for 7 years - but your current firm has just been purchased and the reality is that it is no longer your current firm - a better platform and a value of 200% of T12 with a replacement of deferred comp with a stock that has a higher percentage chance of appreciation over the next 7 years makes sense.  Morgan has already hired numerous high level positions and a great number of Merrill large producers - I see this trend continuing.  Just trying to provide an educated opinion whether I am involved in a placement or not.

in my office this has created less uncertainty and at least for now we can just focus on the market and our clients and not what will happen to the firm.  We can finally take our eyes of the stock and stop fretting about the survival.  It is what it is.

[quote=rocky]

in my office this has created less uncertainty and at least for now we can just focus on the market and our clients and not what will happen to the firm.  We can finally take our eyes of the stock and stop fretting about the survival.  It is what it is.

Rumor has it at 50-60% for top producers - 30% for mid level - haven’t heard about smaller producers.

If that rumor pans out BAC will lose allot of producers.

That’s all I’m trying to say…LOL.

If that rumor pans out BAC will lose allot of producers.

what level GDC is 1st, 2nd, 3rd and 4th quartiles?

Figure on 1rst quintile being roughly 2.5 mm+

what happens if you take a deal at a new firm for say 7 years and 200%, and your new firm is bought out…

what happens if you take a deal at a new firm for say 7 years and 200%, and your new firm is bought out…

Contracts genereally state “XYZ firm and its successors” not to say that a material change in ownership structure couldn’t be argued and possibly challenged - excellent question given the current environment.  I will get a legal response ASAP and will post.

what quintile is 450-600k, and what type of retention…if any…LOS over 6

Retention packages are still to be determined with the top end rumored at 50-60% of T12.  I believe that  that 450-600k LOS 6 is in the lower 3rd quintile.

I say don’t take the retention.  Instead move to an indy and take 90% payout.

snaggle-problem with indy is you are in the same boat as everyone else, meaning you have to compete. I’m not saying indy isn’t good- I think it is, but you DO NOT have the capabilities of ML, MS, SB, etc. With banks behind them, you have just moved WAY BEHIND. Think about it. If BAC lies, ML will bolt. But LPL can’t do what ML can do-no way. I’ve looked, and it’s not close.

badmove-upper quintile 3, very low quintile 2

snaggle-problem with indy is you are in the same boat as everyone else, meaning you have to compete. I’m not saying indy isn’t good- I think it is, but you DO NOT have the capabilities of ML, MS, SB, etc. With banks behind them, you have just moved WAY BEHIND. Think about it. If BAC lies, ML will bolt. But LPL can’t do what ML can do-no way. I’ve looked, and it’s not close.

[quote=donatello]snaggle-problem with indy is you are in the same boat as everyone else, meaning you have to compete. I’m not saying indy isn’t good- I think it is, but you DO NOT have the capabilities of ML, MS, SB, etc. With banks behind them, you have just moved WAY BEHIND. Think about it. If BAC lies, ML will bolt. But LPL can’t do what ML can do-no way. I’ve looked, and it’s not close.

[quote=donatello] I’m not saying indy isn’t good- I think it is, but you DO NOT have the capabilities of ML, MS, SB, etc. [/quote]

You mean the capability to run the firm into the ground by putting all their capital into flim flam CDO’s and shaky mortgage backed securities?  Or the capability to sell themselves to a bank to avoid collapse?

Which one?

snaggle-problem with indy is you are in the same boat as everyone else, meaning you have to compete. I’m not saying indy isn’t good- I think it is, but you DO NOT have the capabilities of ML, MS, SB, etc. With banks behind them, you have just moved WAY BEHIND. Think about it. If BAC lies, ML will bolt. But LPL can’t do what ML can do-no way. I’ve looked, and it’s not close.

donatello,



Specifics please:



Exactly what capabilities do wirehouse FAs have that independent FAs lack?



How exactly does having “banks behind them” offer any meaningful benefit to an FA?



What is it that an LPL advisor can’t do that a ML advisor can (with or without a bank behind them)?



Since as you say you’ve looked, and it’s not close, you must have a ton of specifics that you can share with us. Enlighten us, by all means.

Name the lending side of the business you can do.

Also, do you have discretionary stock accounts?

Lending and discetionary accounts?  Is that the sum total of what you think wirehouses have that independents do not?  

Lending is considered an outside business activity and you can represent many institutions (and get paid). Discretionary accounts are okay as well.

[quote=Mucho de Tejas]Lending is considered an outside business activity and you can represent many institutions (and get paid). Discretionary accounts are okay as well.

Morphius,

[quote=donatello]Name the lending side of the business you can do.[/quote]

Do you read the newspaper?  Do you really think it’s an advantage to be affilliated with a lender these days?  Think about it.

You want to help people grow their ASSETS and minimize their need to take on debt.  That’s my old-fashioned opinion.

[quote=donatello]Morphius,

Tello,<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Why do all of these capabilities need to be within your own firm? What difference does it make if you perform these activities outside of your business? It just so happens that referring these lending related activities out (and still getting comped) has certainly helped independent advisors everywhere build their network. If I market my core competency as investment management then I don't expect (or want) the client to assume that I would be proficient in making him a car loan.  

I worked as an FA at both Merrill and at BAI and I thought ML was great and BAI sucked. The combination could be great if they can integrate the cultures but with all the offerings each has, most advisors end of being jack of all trades and masters of none and float into mediocrity. Independence forces you to choose a path and master your core competencies.

Take a breath, donatello.  You seem to be imagining enemies everywhere.  When did I “trash ML/BOA”?  I simply asked for you to explain your statement that independents can’t do what ML can do.  Based on your response, a few things seem clear.

First, the discretionary account thing is simply a non-issue, as that is almost universally easier to do at an independent than a wire.  Discretionary portfolio management makes up the vast majority of my business, so yes I can do exactly what you ask.  I’m sure further due diligence on that will make that very clear so I won’t belabor that further. 

Second, you apparently believe that  providing lending services of all kinds, and doing so strictly from inside a common corporate umbrella is important to clients and to individual FAs.   That is an opinion.  Personally, my opinion is that this is not important to most clients or FAs.  My observation is most clients are mainly ninterested in getting help addressing their lending needs, but don’t necessarily care if it is at the same institution they use for investing or banking or insurance.  In fact, the concern about proprietary products and potential conflict of interest would, I suggest, make that LESS attractive for most clients. 

Similarly, if you happen to be one of the rare FAs who earns a significant portion of your comp from lending, then by ball means keep your emphasis on lending capabilities. Obviously most FAs do not, and never will, make enough from lending to make this a critical element of their practice.  Perhaps you are an exception.  One of the great things about this business is that we can choose to serve clients in many different ways, with wildly different focuses.  Just realize there are plenty of ways to provide this sort of service outside of the wires - and get paid for it - with the added distinction of not being limited to an inhouse proprietary product.

Third, consider the possibility that the firm itself may be far less important to clients than you might think.  If you are like most FAs, your clients would say they are doing business with you, not the firm.  In that respect, it doesn’t matter much if ML is better than LPL or firm A is worse than firm b.  All that really matters is if you have the ability to serve your clients in such a way as to leave them - and you - satsified.  ML may be a fabulous FIRM, but it certainly is not the best for every FA and every client, and the same is true of LPL (which I use as an example only because you used them as the alternative to ML, not because I am afflilited with them - I am not).   To me it’s a bit like worrying about if GM is a better company than, say, Ford, when really all that matters is if the specific car I drive satisfies my particular needs and budget.

Work wherever you want, donatello my friend, but don’t sell yourself short - your success is far more due to you and your abilities than it is your firm or it’s capabilities.  That will be true whether you choose to stay OR go.  Good luck with your due diligence.

Work wherever you want, donatello my friend, but don’t sell
yourself short - your success is far more due to you and your abilities
than it is your firm or it’s capabilities.  That will be true whether
you choose to stay OR go.  Good luck with your due diligence.

Never a truer word was said.

I dont want to get involved in this debate, because i have to admit i just dont know enough about the indies. But i have a question (actually two) for the Indies - if you have the ability to run portfolios on a discretionary basis - do you have the technology that allows you do trade 30-40-50 accounts as one? I run 3 models, and have all the accounts on the system segregated by model. If i want to do a trade in one model, say, bring all of my accounts in model 1 up to 4 % in their position in IBM, i do one block trade, and the system allocates the stock to all the accounts accordingly. Just curious if you Indies have that platform available.

Second question, and i know this is one that i should know the answer to, but i dont, i never paid attention to it before. Never needed to. Been at a wire my entire 9 year career, never thought about anything else. Can someone explain the diff to me between being an RIA, and going Indie?

Last point, this thread goes to a question that i have struggled with my whole career. This thing about being the trusted advisor and taking care of all their financial needs. I am a CFP, so i guess i sort of buy into the idea of speaking with clients on a big picture basis. And i was trained and always taught to take a planning approach to 'strenghten the relationship" and “take the focus off performance”.
But it seems to me that clients and prospects come to us for Asset Management, and at the end of the day, they dont give a rats ass how good we are at analyzing their cash flow, or doing an insurance review. They want us to manage their money first and foremost.
So this is something i struggle with, and go back and forth on, in my own mind. Curious to hear others thoughts.

Actually (in the edit post mode right now), this started out as a recruiting thread, didnt mean to hijack it, i am going to post the last part of this under a new thread , sorry guys.

[quote=Sportsfreakbob]

I dont want to get involved in this debate, because i have to admit i just dont know enough about the indies. But i have a question (actually two) for the Indies - if you have the ability to run portfolios on a discretionary basis - do you have the technology that allows you do trade 30-40-50 accounts as one? I run 3 models, and have all the accounts on the system segregated by model. If i want to do a trade in one model, say, bring all of my accounts in model 1 up to 4 % in their position in IBM, i do one block trade, and the system allocates the stock to all the accounts accordingly. Just curious if you Indies have that platform available. [/quote]
Yes.  Absolutely.  That technology is readily available from several sources.

[quote=Sportsfreakbob]

Second question, and i know this is one that i should know the answer to, but i dont, i never paid attention to it before. Never needed to. Been at a wire my entire 9 year career, never thought about anything else. Can someone explain the diff to me between being an RIA, and going Indie?
[/quote]
Ah, yes - you are in good company with this confusion.  This is a common and recurring issue.  The term “independent” or "indy"as used in
this industry has essentially been co-opted and rendered about as
ambiguous, at its core, as “financial advisor.”  It can mean so much,
that it ends up having little useful meaning.

Compounding the situation is the the big b/ds have zero incentive to educate you on this, as it is essentially their competition.  As a result, you have to be willing to show some initiative and do your own research.  This proves to be a great process of natural selection, because those who lack the intitiative to explore options independently by definition have no business GOING independent. 

This has been addressed in some detail on several occasions, which you can find if you do a search on RIA.  Here is a link to one such thread that may be helpful.

http://forums.registeredrep.com/forum_posts.asp?TID=6218&PN=1

Morphius,

Maybe I am missing something, but I am having a hard time understading this institutional price comment. Everyone purchases equities at the prevailing market price. I have used half a dozen DMA platforms including all the current and former ECNs and systems from many of the wirehouses offered to institutions. I am at a wirehouse now in retail and while your wirehouse or retail plaftorm may have a shitty interface, and slow execution, equity trades are done at market prices in the year 2008. What are these better prices you guys are discussing?

[quote=donatello]Morphius,

Morph - thanks for the comments - i will go to the link you included and do my research.

regarding institutional prices - i can only assume he means to refer to institutional share classes of MF’s. This comment confuses me as well.

donatello, 
Friendly sparring is fine with me.  What in the world do you mean by “institutional share prices of stock through a program?”  There is only one price for a publicly traded stock, and it is the same for me as for the American Finds PM.  And how does one buy it “through a program?”

Morphius,

[quote=donatello]Morphius,

BAC will put a stranglehold on Merrill to the likes noone has ever seen. I know, I worked for them as an FA. Compliance will be so stieffling, frustration will get the best of most FA’s and departures will be enormous.

In addition to which, does anyone really think that BAC is going to refer their “customers” to ML FA’s? No way. Its actually the reverse, just like Citi, they will have their people all over the ML FA;s to get them to sell BAC services like checking and credit cards.
They will also do all the things to piss off the ML FA;s that Citi did to SB for the last 10 years. Its only the last year or two that Citi finally got it, understood the culture difference. Now they only piss us off if they absolutley have no choice.
ML/BAC has a long learning curve ahead of them.

By the way, i too, am curious as to how the PM can buy MSFT cheaper than an FA can. Post it publicly, not in a PM, for the greater good.

Back to the thread at hand: recruiting deals. I am curious—has this stuff shut down recruiting by ML managers? Let’s make the assumption there is someone that would GO there given the market and Merrill’s role in it (a stretch): are they spending money on deals, etc?

As of last week, the local ML BOM was calling into my branch trying to
recruit, so the short answer is no. But - big but - i wonder what this
environment is going to do to recruiting, notwithstanding the BAC.ML
deal.

I agree–things go in cycles and maybe we have hit (or are AT) the top of the deal size cycle. Here’s a thought for the semi-lazy: go to ML assuming there will be some level of exodus once BAC sinks their teeth in. They have enough FAs with lots of AUM who won’t take every single account with, and you fill back up any assets you can’t pull over in your own move. “Piker” thinking, but good, no? Or at least creative.

[quote=donatello]Morphius,

I think that Merrill will still be recruiting.  A very large percentage of top producers are waiting to see the retention package but have started to open the lines of communication so that an exit strategy is in place (always a good idea).  Once the dust settles, look for Merrill/BofA to continue their “hire everyone” growth strategy to replace the empty seats left behind by the mass exodus that is awaiting them.

donatello,

Still no word on how a portfolio manager can buy stock at a different price than the rest of us?  That’s OK, my friend, don’t stress out over this.  It’s not about winning or losing an argument, it’s about getting closer to the truth.

Ask yourself this : what if some of your other assumptions about differences between the capabilities of wirehouses and independents are also off base?  You wouldn’t be the first one to find themselves in that situation.  I was there myself, once upon a time.  In fact, I was way worse than you.  But I was open to learning, and that made all the difference.

Just open your eyes to the possibility that some of your wirehouse vs. indy assumptions might - just possibly - be worth honestly re-examining.  For your own benefit.

Good luck.

[quote=Morphius]

[quote=donatello]Morphius,

I recently moved (about 4 months ago) - left BAC, which truly is a hideous place to work. I considered the Indy route but was too chicken. The question I kept asking was how do you deal with the liability involved in what we do (I am also a CFP) without having a strong guard behind you? The RIA has to do his brochure thing then no one is checking behind him. Most of the Indies in my town are slamming Par Life insurance and A shares from whomever is paying the highest Y-T-B. Unless the investor gets a second opinion, they never know. (I said most not all - there are a couple of very sharp boutique shops which I envy).



THen there are the other resources from software to subject matter experts I can draw from when with a big firm. I also like being exposed with others from my firm from other places, like the Bible says, "iron sharpens iron."



I agree the research is crap everywhere but we all read it to some extent. I also anticipate one answer that being the pay difference is what it is for a reason.



As far as the lending at LIBOR business goes - most - or very many banks will not lend on a portfolio unless they have it in their custody. They are no longer merely satisfied with a copy of the statement with the pledge on the stencil. I will admit, that it is a very small portion of what I do, they usually involve large relationships.

[quote=bancofamigo]Most of the Indies in my town are slamming Par Life insurance and A shares from whomever is paying the highest Y-T-B. Unless the investor gets a second opinion, they never know. (I said most not all - there are a couple of very sharp boutique shops which I envy).



[/quote]

Keep in mind that these assertions are being made by the same individual who insisted that Bank of America used to own Dean Witter.  Consider the source.

I also said it was a joint venture (correcting myself - with proof no less!) and the point was the same meaning - that BofA has never, not one time, integrated anything but a retail bank successfully into its fold. Read the whole thing before you flame. If you are a big BofA supporter, hats off to you! They still are a hideous firm (BAI that is) and their results prove the point. They went from 2,800 FA’s to less than 2,000 in the past three years. It wasn’t due to “attrition”. Their top producers are leaving in droves. The bankers cannot get along in the sand box any longer and it is back to the old broken silo system.



But maybe you are (or were) one of those Sears guys who loved to say they were from Morgan Stanley even though you worked at Dean Witter for 20 years. Embarrassing, if you ask me, to not admit who your mama is. In fairness, I started at ML, went to BofA for 3 years, did very well and got sick of the Walmart that is BofA. I have since returned to the wirehouse, although not ML. My post was simply musing about the indy route and my own misgivings. I am looking for clarifications from professionals that are indies. My own small town experiences are what they are so I wanted to ask the group. I also said that there are a couple (2) boutique shops that are sharp. The others are shops that I take great pleasure in moving their clients to a more professional and caring advisor.



In the words of Michael Corleon, “It was Roth!”

Good post, bancofamigo.  A couple of points for you on your indy observations.

Most of the Indies in my town are slamming Par Life insurance and A shares from whomever is paying the highest Y-T-B.

Even assuming that there is something inherently wrong with what these indys you describe are recommending (which is just an assumption), that should hardly be an indictment on independents as a business model.  Otherwise the similar existance of FAs at wires who make questionnable recommendations would mean wirehouses as a whole are bad.  Distinguish between the business model and the practioner.  You have to have knowledge and ethics wherever you are, independent or wire or anywhere in between. 

How do you deal with the liability involved in what we do (I am also a CFP) without having a strong guard behind you?
The same way all firms do - establish prudent control policies and procedures and purchase E&O insurance. 

The RIA has to do his brochure thing then no one is checking behind him.
Obviously at least one person at a firm has to be up on
these matters (CCO) just as anywhere, but there are plenty of comliance vendors available to help you set
this up right.  You don’t have to be a compliance guru going into it.  More importantly you should realize that compliance
as an RIA under the SEC/state is way easier than what you know as a rep in a b/d under the gestapo FINRA.  Different planet.

Beyond that as an independent RIA you are indeed ultimately responsible for your own actions, and like all business owners the buck stops with you, with all the potential benefits and demands that entails.  If that is a net negative to you, I would agree it is not the right business model for you.

I considered the Indy route but was too chicken.
No problem.  It’s not for everybody.  At least you are honest enough to recognize this as the core reason rather than making rationalizations like the typical  “all the indys in my town are scumbags” or “they’re all pikers who couldn’t make it at the wires” stuff too often thrown out.