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Jul 30, 2006 9:47 pm

I posted this as a response on another thread but  wanted to post it "as it's own" as I am very curious for the response.


Had a broker in our office leace in late 2005.  Took a huge check to go to a wirehouse.  Broker had significant assets and the trailing 12 was very large.  However, the broker has only been able to move over approx. 20% of the clients/gross.  Even worse is that 80% of the clients/gross he was able to move over was split among 4 clients.  And due to the pitifull perfromance the clients' received under the broker's care, 3 of them are in the process of ACAT'ing back to my firm.


Question I have is- what the heck happens to this broker?  He has a desk and a phone (no referral sources) and must be looking at the abyss.  Can he sit back and laugh at the firm that gave him this huge check? Or does accountability come into the picture? Does the new firm attempt to recapture their up-front $?  How does this play out going forward?



Jul 30, 2006 10:01 pm

Probably depends on how the contract was drawn up. If he had been around

forever and drawn income from this big book, perhaps the lump sum put

him a position where he won't need to work. However, the new firm can

always get rid of him for lack of production I think....and make all the taxes

on the upfront chunk come due, instead of being spread out. As you

mentioned on the other thread, it would appear this guy overestimated his

pull w/key clients. I would hope that if I was sitting on a fat annuity I would

know whether or not it was possible to get those assets to go with me...it is

always a risk, but you have to make an honest assessment of the

probabilities. If big clients are moving due to returns only in 2006, then he

didn't have the relationships he should have or thought he did. If it was bad

returns over the course of the whole relationships, why did the clients

transfer out in the first place?

Jul 30, 2006 10:21 pm

Overestimated is a huge understatement!  The relationships were not longer than a few years; the broker as they felt they had a "perfect storm" coming.  Leave, take big check, grap all the assets, etc. 


The few clients that transferred out was likely due to the good service that was provided by the broker.  After the paltry returns were relayed, as well as the reason for leaving (big $$$) the clients' wised up.  Many were (frankly) shocked that the broker was even contacting them, let alone thinking they would move over. In fact, may clients thought the broker was terminate due to the poor performance in the accounts.


I'd just like to know how the new firm is taking this.

Jul 31, 2006 9:06 pm

Good post Judge.

Aug 1, 2006 12:22 am

from my experience he does not care who comes or stays.  He looks at his checking account balance when feeling down and it brings a smile to his face.

Aug 1, 2006 12:35 pm

Typically - the big 'check' is dependent on the retention of his (or her) existing practice.  I know with UBS - if you bring over less than 80% of your assets, the proposed 'waffle' is also reduced.  Not sure how many firms roll the dice and give a producer a check for $500,000 cash and just 'hope' for a majority of the business to follow.

Aug 12, 2006 1:31 pm

Any idea on the timeframe  a broker has to bring over  his/her  assets and clients?

Aug 13, 2006 5:35 pm

I have heard one year from some deals that I am familiar with.