100k minimums-what the heck?

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Jun 23, 2007 6:48 am

I am re-introducing myself so that I can qualify my question.


I am a midwest, Fixed Income Trader. I have about 9 years experience in financial services field, mostly doing the selling TO licensed reps. I am looking to transition into a career for an FA.


I am noticing this big push in the industry to only take clients with a minimum of 100k. It does seem to be a wirehouse or firm who does HNW qualifier. So, please tell me, how does one find this type of investor? Do you cold call? Does the reputation of your firm connect you with this type of person? What is it?


I am just curious because this would seem to be difficult for a newbie to obtain initially. Also, I notice only about 15-20% of the reps that I work with have accounts in the six digit worth, and I do a more HNW product.


So, what's everyone's thoughts?

Jun 23, 2007 9:51 am

The money is out there, you just need to find the right channel to find them.  Cold calling is one ineffective method, but it's free so most newbie do that.  You can place ads in publications that rich people read, you can join clubs with members who are rich people; but that takes a little investment.


Will the firm help an FA?  That depends on the firm I guess.  But there is no free lunch; that much I know.


$100K is not that high a requirement in the FA business.  Below it, diversification begins to get difficult and perhaps expensive too.


You also have to consider how much time you have.  It takes just a little more time to service a $5 mil account than a $100K account.  You can service at the max about 40-50 clients.  So you want to eventually focus your effort on the big guys, not the small ones.


I remember a few years back Stan O'Neil set a policy to take only $1mil and above account, and ML profit soared.  Something to think about.


Jun 23, 2007 10:24 am
lady_trader:

I am re-introducing myself so that I can qualify my question.


I am a midwest, Fixed Income Trader. I have about 9 years experience in financial services field, mostly doing the selling TO licensed reps. I am looking to transition into a career for an FA.


I am noticing this big push in the industry to only take clients with a minimum of 100k. It does seem to be a wirehouse or firm who does HNW qualifier. So, please tell me, how does one find this type of investor? Do you cold call? Does the reputation of your firm connect you with this type of person? What is it?


I am just curious because this would seem to be difficult for a newbie to obtain initially. Also, I notice only about 15-20% of the reps that I work with have accounts in the six digit worth, and I do a more HNW product.


So, what's everyone's thoughts?



Did someone tell you that $100,000 was a lot of money?

Jun 23, 2007 3:20 pm

Bobby-


Yeah, I do think a 100k is a lot of money, especially for a new person for a new account. For "investable assets", it definately is. (At least in my book.)




Jun 23, 2007 3:28 pm

Lady_trader.


My advice would be to go after the 401k rollover market.  People aged 55+


For the most part, all of these accounts should be over $100,000.


Position yourself as someone who wants to help people manage ALL of their assets.


Don't focus on selling product (for example, don't cold call trying to sell $25k of a muni), rather focus on trying to review peoples portfolio and managing most of their assets.


BH is right, $100,000 is not that much for people ages 55+ when talking about their IRA 401k.  But like I said, if you market yourself as someone who manages peoples entire portfoilo of investments, you should find the accounts will generally be $100,000 +


Good Luck.  Whether you cold call, network, advertise, or whatever best suits you, it is achievable any way.

Jun 23, 2007 4:34 pm
lady_trader:

Bobby-


Yeah, I do think a 100k is a lot of money, especially for a new person for a new account. For "investable assets", it definately is. (At least in my book.)






Sounds like your "book" is more like a pamphlet.

Jun 23, 2007 7:58 pm

You cannot survive at a wirehouse (at its payouts and standards) and be looking to open ANY accounts at less than $100k.


In this part of the country, you are expected to be prospecting for accounts that are $500k+ exclusively in your first years. Then the move should be to only accounts that are $1 million+. Most brokers need to have a book that is over $50 million at 5 years in order to be kept on in a branch. This is why the failure rate is so high.


Although, all of this is in a managed money / financial planning world, so if you're talking about insurance or loaded products, then it's probably ok to prospect for small accounts. However, this is not what most people have in mind when they think of a "financial advisor" career.


Unlike being a wealth or pure money manager, being in consultative sales (insurance, financial products, mortgages, real estate) really is a numbers business - if you can increase one number (cold calls, referrals, etc) you can decrease another (assets, commissions, etc). Figure out what numbers that you're averaging (i.e so many dials lead to so many connects lead to so many sales) and determine how many sales you need to make in order to meet your numbers. Don't listen to what the firm tells you - figure out what your numbers are. Then work that hard. Don't expect that your numbers will be as good as the guy next to you - figure out what your numbers are.


In many cases - even in wirehouses - the best model is to combine both strategies. Generally speaking, even the best salesmen will not make enough money (how ever hard you work) trying to become people's financial advisor at the very beginning of your career. The immediate payoff is too low. People who start out building exclusively managed money businesses tend to starve in their first few years. It really isn't until your 4 or so year with a client that you will make more than you would have expected to selling them into an A share. Managed money and financial planning are about recurring revenue and building trust and a relationship with clients. While being a financial advisor is a much better job, these things take time. My guess is that most rookies (and sales managers) don't have that kind of patience.


So my recommendation to most rookies is to do both. Prospect and sell differently for different types of clients - sell A shares (commission products) to the people for whom they are most appropriate (smaller accounts, affluent people with simple needs) and become the true financial advisor (recurring revenue programs) to those clients who need one. This will keep food on the table in the short term, while you build a book for the long haul.


Sounds hard to do both? It is. But, I think that rookie financial advisors should expect to work 60-80 hours a week minimum in their first three years. They should be highly organized and have complete tunnel vision. Everything they do should be about their business (where you eat, where you work out, etc). When you aren't prospecting, you should be servicing existing clients; When you aren't servicing your clients, you should be studying for the CFP or CFA. When you do actually have fun - where you should be doing it with people with money. 


But, if you are smart and committed, within 5-7 years, you will have built a beautifully annuitized business and either have or be well on the way to the lifestyle you've always wanted. And then you can spend your free time writing article - length postings on message boards.

Jun 24, 2007 10:56 am

Free Lunch and San Fran-


I have been researching this site and I notice that both of you provide articulate, constructive responses.  It is appreciated 


I like both of your recommendations: 1) Going after 401k rolls and 2) Balancing financial advice and doing commission-based work.


Thank you.


Jun 24, 2007 11:10 am

As an independent with a long standing client base, most of my accounts are over 100K....way over.  I'm not forced to a minimum account size by my B/D.  It is more cost and time efficent to manage fewer large accounts than many small accounts.


But I still will occaisonally open up smaller accounts.  In fact many of my larger accounts were opened with a small to mid size IRA or a child's custodial account.  When clients give you some money to manage, they are not going to immediately hand over the entire bankroll.  They are testing the water to see how you perform.     If you do well and give personal service then they will bring you more AND referr you to their friends and family.


I do have the advantage of being able to decline smaller accounts, a luxury that a new broker doesn't have, because of my length in the business. 


To answer your question of how to find high net worth people and since we are both "old ladies", I suggest you network with and do educational presentations for women's groups such as American University Women, Soroptomists, other clubs that consist of retired or near retiring wealthy women.  In my area that is the art guilds, symphony supporters, garden clubs.  They are always looking for presentations and I have found that  1. they have money 2. they will be interested in working with a woman 3. they are independent thinking and progressive people.

Jun 24, 2007 11:11 am

oops I thought I was responding to old ladies post.   You may be younger than me, I apologize for calling you "old". 



Nevertheless the women's networking advice still stands.

Jun 24, 2007 11:23 am

Dust Bunny-


Hehe...I am in my early 30's. I loved your post though. Especially the garden clubs-right up my alley I think you have posted before that you and your husband do the classic car crowd as well? Right this minute, my husband is working on restoring a 1968 Camaro.


You answered my original question, however. Not being experienced, I was thinking that someone might give a newbie a small account like an UTMA to see if they could handle a larger account one day.


Thank you for responding.

Jun 24, 2007 11:39 am
lady_trader:

Dust Bunny-


Hehe...I am in my early 30's. I loved your post though. Especially the garden clubs-right up my alley I think you have posted before that you and your husband do the classic car crowd as well? Right this minute, my husband is working on restoring a 1968 Camaro.


You answered my original question, however. Not being experienced, I was thinking that someone might give a newbie a small account like an UTMA to see if they could handle a larger account one day.


Thank you for responding.



You are getting some great advice on this thread. One thing I have to say about networking (actually 2 things)


1. It's someting you should definately be doing from the start, wish I had someone give me that advice when I was new.


2. It takes a year or two to bear fruit, most of the time.


The reason I bring up number two is that if you are in a wirehouse as a new FA, there will be a lot of contradiction thrown at you. Mainly they all want you and expect you to build a fee based business, based on financial planning, relationships, trust, etc. and at the same time, they give you numbers that you need to hit in, like 10 minutes! Hard to do both.


I would take all comers when you first start out, but once you get the small ones in, put them in something that is appropriate for them, but pays you now, and doesnt take a lot of maintenance. Spend you time on the 200k+ households. Thats where you annuitize, help them plan, build relationships, and clone them.

Jun 24, 2007 5:02 pm
lady_trader:

Dust Bunny-


Hehe...I am in my early 30's. I loved your post though. Especially the garden clubs-right up my alley I think you have posted before that you and your husband do the classic car crowd as well? Right this minute, my husband is working on restoring a 1968 Camaro.


You answered my original question, however. Not being experienced, I was thinking that someone might give a newbie a small account like an UTMA to see if they could handle a larger account one day.


Thank you for responding.



Oh yes. The classic car/hot rod car club is also a great way to network and meet people with discretionary spending.   If you can afford a $5000 paint job on your Goat, you've got bucks.  Plus, it's a lot of fun.


My dream car... when I win the lottery ..... 1949 Buick Roadmaster Convertible...sigh.   http://www.buickstreet.com/49buickstreet.html  I defy anyone to say that isn't a gorgeous car.


In the beginning don't worry about the size of the account, unless your B/D will can you if.   It's all about the potential of the account.   Kind of a meat/motion thing

Jun 24, 2007 5:39 pm
Dust Bunny:
lady_trader:

Dust Bunny-


Hehe...I am in my early 30's. I loved your post though. Especially the garden clubs-right up my alley I think you have posted before that you and your husband do the classic car crowd as well? Right this minute, my husband is working on restoring a 1968 Camaro.


You answered my original question, however. Not being experienced, I was thinking that someone might give a newbie a small account like an UTMA to see if they could handle a larger account one day.


Thank you for responding.


Oh yes. The classic car/hot rod car club is also a great way to network and meet people with discretionary spending.   If you can afford a $5000 paint job on your Goat, you've got bucks.  Plus, it's a lot of fun.


My dream car... when I win the lottery ..... 1949 Buick Roadmaster Convertible...sigh.   http://www.buickstreet.com/49buickstreet.html  I defy anyone to say that isn't a gorgeous car.


In the beginning don't worry about the size of the account, unless your B/D will can you if.   It's all about the potential of the account.   Kind of a meat/motion thing



That's mighty nice, but I prefer to set my sights on something a little more contemporary:

http://www.porsche.com/usa/models/911/911-carrera-cabriolet/ gallery/

If I get that call from Publisher's Clearinghouse tomorrow, I'm off to the dealership!

Jun 24, 2007 6:29 pm

Dust Bunny- that is one BEAUTIFUL car


Joedabrokrkr-When I paste your link, "the file isn't found". However, I know my horse-powered obsessed husband wouldn't mind a Porsche in his garage.


Pratoman-Seems like I need to start networking seriously. Thank you for your solid advice.


Jun 24, 2007 6:36 pm
Dust Bunny:

[quote=lady_trader]

Kind of a meat/motion thing



Why do you set yourself up like this?

Jun 24, 2007 8:11 pm
lady_trader:

Dust Bunny- that is one BEAUTIFUL car


Joedabrokrkr-When I paste your link, "the file isn't found". However, I know my horse-powered obsessed husband wouldn't mind a Porsche in his garage.


Pratoman-Seems like I need to start networking seriously. Thank you for your solid advice.




Try this one:

http://www.porsche.com/usa/models/911/911-carrera-cabriolet/ gallery/#

I managed to truncate the other one by a few characters.

Jun 24, 2007 10:58 pm

under 50k G it up.

Over 50k Fee it up.

Jun 24, 2007 11:47 pm

http://www.porsche.com/usa/models/911/911-carrera-cabriolet/


Joe...you suck at posting links...

Jun 25, 2007 8:54 am
Indyone:

http://www.porsche.com/usa/models/911/911-carrera-cabriolet/


Joe...you suck at posting links...



Apparently so!