Hating on Bank/Credit Union Brokers

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Jul 19, 2005 2:07 am

I feel like hammering someone tonight, so here it goes:


Banks are great at CD's, Money Market, Savings and Bait & Switch annuities.  What they're not good at is everything else. I'm surprised that if you only have 3 audit violations as a bank broker, you don't get a bonus.  As you're jacking up your 1-year CD's 25 basis points for your "best" clients to 3%, a real broker is building their book someplace else.  When you are bouncing around your 20 branches pitching $25/month DCA's, your manager is waiting to pull one or two of your branches away from you when you get too big.  Hoping to put another 80-year old in an indexed annuity at a 8% rip, you're cohorts are smoozing with all the hot tellers, hoping a few crumbs get pushed their way.  Why anyone would damage their ego beyond repair by working at a bank is beyond me.  What I have seen as a common thread is that the typical bank broker is too scared to prospect on their own and fail at their first go-around as a real advisor.  What makes a bank or credit union (you could insert discount broker here also) a better fit for these type of people is the ability to have a 5 to 10 year stint in a relatively stress-free environment with regular hours but lower pay.  It's like the red-headed step child of the brokerage industry. 


I reserve the right to continue hating.........

Jul 19, 2005 5:44 am

this from a memeber of the "world's best sales force" you know the one that paid the SEC $75 million because they forget to mention to their clients that they had sweetheart deals with their "preferred vendors".  The same group that pushes 30 year bonds to the same 80 year old if given an opportunity.


Those in glass houses shouldn't throw rocks or is it the pot calling the kettle black?  Have those class action suits settled yet and what about the suit brought by the AG in California?

Jul 19, 2005 9:47 am

Having spent years calling on brokers, reps, advisors, etc., from all investment firms in all channels, I can tell you that the bank reps are the worst-if you ask a wirehouse rep. If you ask the bank rep, the wirehouse guy is a crook. If you ask a local planner (who came from a wirehouse), then it's the EDJ and bank reps that are all incompetent and crooks. The planners have no idea how to pick a stock and/or bond, if you believe the wirehouse broker. And on, and on, and on...


This business is as good as it gets for slamming the competiton, regardless of that competitor's time in the business, accreditation, or life experience. It's no wonder the general investing public often has such a poor view of investment professionals.

Jul 20, 2005 8:33 am

I am not a bank brokerage fan.  The reason has nothing to do with competition, but rather a respect for the business.  Bank programs were born and raised by bankers in an era of quick buck, 700 basis point spreads, and a seemingly endless rise to the stock markets.  Banks set goals, and hold people to them.  These goals got out of control, the bank reps and bankers push it to hit them, and the insurance companies are all to happy to supply product to support it.  Who gets lost?  The client who invests the money. 


ALL focus goes on the prospects and new sales, very little consideration is given to the existing client, despite all of the rhetoric otherwise.  While I was at the bank we had one guy who's 1st year goal was $220K in gross.  He sold every high gross product we had, and crushed it with around $320K.  His next years goal was $400K.  He had around 5 mil under management.  He hit that as well.  In fact the bank propped him up like a Pontif for F$$$ sake.  Commercial lenders would spew to their clients "We can price the loan to 1/2 under prime if you bring over your peronal assets from..." which is breaking the law.  Then they would be paid for it.    


Changes are coming about with the expansion of mutual fund wrap, managed money solutions, etc..   THis did not come about via a trip to Compliance and Ethics Church by bank management, but rather wire houses and wire house management getting involved with the bloated bank programs, pushing aside the ignorant, selfish bank management morons. 




Jul 20, 2005 6:53 pm

Rightway,


I've been in a bank program for about 18 months and I am 180 degrees from what most of the reps do here as it pertains to building their businesses.   In my 18 months I've written 2 fixed annuity contracts (and those were unsolicited as I tried to talk them out of it)  and zero VA's.


I do primarily mutual fund wrap accounts as I personally feel they are better suited in almost every case.


I hope the fact that I'm not going for the quick buck and also have a long term business plan pay dividends for my clients and for me down the road.


Time will tell.

Jul 21, 2005 8:47 am
scrim67:

Rightway,


I've been in a bank program for about 18 months and I am 180 degrees from what most of the reps do here as it pertains to building their businesses.   In my 18 months I've written 2 fixed annuity contracts (and those were unsolicited as I tried to talk them out of it)  and zero VA's.


I do primarily mutual fund wrap accounts as I personally feel they are better suited in almost every case.


I hope the fact that I'm not going for the quick buck and also have a long term business plan pay dividends for my clients and for me down the road.


Time will tell.



I am not appose to fixed or variable annuities when properly utilized.  The program I was a part of would have viewed your path this way:


The bank needs to produce a certain amount of revenue from the resources they have, resources being branch deposits and securities clients on the books (your book).  Initially they would let every rep loose, to run things as they see fit.  However, as these formulas of resources-to-production are run at year end, they determined underperforming areas and reps.  In your case, they may look and see you have X branch deposits and X clients, so they are looking for Y in production.  Their Y may be based on a certain percentage @ 5 or 6% commission, and your not working on those margins with WRAP accounts.  If you run short, they go to you and want to "adjust" your territory by taking branches or clients from you. 


Down the road, you find yourself with 100 mil under management with 1 nice branch feeding you, and the bank looks at your prodution at a million, and you represent risk to them, in that you have power and they rely on your production (which would be gone if you quit).  They don't like this either. So, they work to prevent such beasts from being created in the first place, by limiting your resources.  Result?  An army of 300K producers who are interchangable and reliant on the bank, thus can be controlled.    


Like I said though, this is changing.  I even think some programs are paying inflated commissions on these M-Fund wrap accounts initially to help incentify this business.  The best thing that can happen is  getting the bankers out of management.

Jul 21, 2005 9:54 am

In my case we receive 3% upfront  for non qualified assets and 2% for qualified assets.


Then a 1.5% trail annually starting after year 1 in the program.


When you say "changing" do you feel this will benefit my business or otherwise?

Jul 22, 2005 10:20 pm

I don't want to be judgmental and don't care what platform you're on- this rule is the same.


I looked at my book after my first couple years of production and came to an inescapable conclusion. There is an inverse relationship between the amount of fees/commissions clients paid to me and the rate of return the clients received. I wouldn't have survived 20 years in this business if I hadn't come to this realization.


Like it or not, the 80's & 90's are over, for those who remember those days. If we're taking 2-3-400 bps up front and 150 bps trails, that money will come from our investors' pockets. It may not look like it, but that's where it comes from. When the S&P averaged 15%+ it was easy, but if we're in an extended flat period (like 1965-1982) the clients won't make much (if anything) & won't tolerate the situation for long.


Sorry if this has taken us off topic. I've never found the bank channel to be real competition. I'm sure there are advisors who do business the right way and the wrong way in that channel, just like in all other channels.


Age has taught me that whether you do business the right way or the wrong way, you ultimately get what you deserve.

Jul 25, 2005 2:17 am

 Old Dog


Great points!  These guys could learn a few things from you.  Keep up the great info!  I hope your merger works out for you.  You should consider LPL.  I just joined them and so far they are better than advertised! 


scrim67


Just wait you will find that the bank channel will change quickly.  I just had it happen to me.  All they care about is the bottom line.  They don't care about you or your clients.  I would start distancing yourself from the bank.  By that i mean this, make sure your clients are dealing with you and not the bank.  This will pay dividends in the future if you have to leave.  I hope your banking experience is better than mine was



Indytwo

Jul 29, 2005 1:51 am

Olddog and Rightway,


    I couldn't have said it better myself.  What kind of internal expenses are their clients paying when the broker gets 3% upfront and 1.5% annually?  PLEASE let me run into a couple of these accounts a month. 


    Bank brokers can continue to kid themselves.  I've heard it all before.  Can any chop-shop bank or credit union broker look at themselves in the mirror each morning and really say, "I am doing what's right for the client with all the annuities I'm slinging", or "I do a great job servicing my accounts", or "I have the best training in the industry", or "if I leave this place I'm sure I'll take the majority of my clients", or "When I am with a group of advisors from other firms, I will be proud to let them know I work for this Credit Union (or bank)"


    I reserve the right to continue hating......

Jul 29, 2005 10:13 am

Rankstocks,



You obviously haven't crawled out from underneath your rock. I can't speak for the credit union, but the large national bank brokerage houses are going to give the wirehouses a run for their money where competition is concerned. Wake up and be informed. Don't you think the banks realize they have to compete with the wirehouses everyday for talent? The differential between payouts is slowly narrowing. The banks have the money and insist on greater penetration of those assets to investment products.

Jul 31, 2005 1:30 am

I maintain, if you can do your 30 door knocks per day successfully, you
can also quite easily work at a bank and net $100,000 this year
rather than at some mythical time after you've "built your business."  Wahh wahh, how much is your "freedom" worth to you?  I can do bond ladders, too, woopty do.

Jul 31, 2005 7:11 pm
ezmoney:

Rankstocks,



You obviously haven't crawled out from underneath your rock. I can't
speak for the credit union, but the large national bank brokerage
houses are going to give the wirehouses a run for their money where
competition is concerned. Wake up and be informed. Don't you think the
banks realize they have to compete with the wirehouses everyday for
talent? The differential between payouts is slowly narrowing. The banks
have the money and insist on greater penetration of those assets to
investment products.





In theory I can see this.  My sticking point is the individual
reps making the jump from bank teller contests, books of business that
is 2000 clients @ an average size of 100K, and beholden to not only
management but the banker/referral sources.  At some point, we
want to get off this treadmill, step up our client base and
sophistication, and advise more than sell.  Are the banks
recognizing this, and making a path for you to follow, or are they just
a fat garden for newer brokers?

Jul 31, 2005 7:44 pm

Yes, in my honest opinion the bank (large national) I work for is changing and wants their FA's to be advisors and not product pushers. They're evolving and will give the wire houses a run for their money. Especially since the wirehouse have lost theri luster after this last bear market go around.

Aug 3, 2005 10:29 pm

EZ,


     Your tune will change.  It always does with bank brokers.  Wait until they restructure again or get bought out.  Wait until your manager tells you that you are getting too big and cuts your referral source or slices your book.  I'll be little devil on your shoulder laughing as you cry.


     While you're working 9-5 looking over your shoulder at the clock, I'm trying to lower my golf score.


     GEORGE,


     If making only 100k sounds like a career for you, more power to you.  You'll be making more than the average person out there.  If you want 300k+, you better start working a little harder.