Should I stay or should I go?

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Jul 5, 2006 7:50 pm

Newbie to the forum. Been dissecting it for quite some time for info. Here's my question. I am a five year "vet" that started from scratch with everyone's fav firm on this forum, Edward Jones (it's really not as bad as y'all seem to think-the opportunity is what you make of it and they gave me a shot when NOBODY was hiring in 2001). I am pushing $30 mil in assets and my trailing 12 is $340k. I am being recuited hard by Smith Barney and an offer is on the table. Here's the deal:


65% of trailing 12 upfront cash (forgivable over 9 years)


10% restricted stock award at 14 months if 80% of assets follow me.


In addition, I am being asked to join a team with a 25 year vet with $120 mil in assets who is producing $600k. He's still fairly young, but wants me to be part of his "Franchise Protection Plan", i.e. eventually he wants me to take the lead in the team while he fades into retirement and travels with his wife. He is one of the most respected advisors in my town (he was the branch manager of the Legg office that just got sold to SB).


My questions are.


1) Reading this forum, it seems like a crappy offer on the financial end of the deal. What should I ask for considering LOS and considering the fact that I built my book from scratch? How do I ask without seeming greedy? Any feedback would be greatly appreciated.


2) Anybody here have any experience working with teams? Anybody in the same kind of situation teaming with a senior advisor? What are advantages/pitfalls/things I have not thought about?


3)finally, going to a wirehouse from the folksy place Jones is makes me nervous. How bad is the culture shock going to be?


Any help greatly appreciated.


Thanks for the entertaining forum.


-Rockstar



Jul 5, 2006 7:56 pm

You're doing fine- good for you.


I'd recommend staying where you're at.  You WILL lose a # of accounts by moving, and 100k over 9 years is nothing much when you're currently making 100k.  Yes, SB likely has a better platform.  Still, it will not "magically" attract clients/prospects whatsoever.  The partnership is another matter.  Unless they offer to pay you a hefty salary from the start, you'll simply work the C, D & F book which is something in year 5 you don't want to be doing.


Stay put and keep doing more of what you're doing.

Jul 5, 2006 8:27 pm

What are you basing it on when you say he/she will lose accounts? Doesn't

seem to the be the case for most transfer brokers, regardless of where they

are coming from.

Jul 5, 2006 8:44 pm
Jul 5, 2006 9:47 pm

Bankrep-


Yes I am relatively happy with Jones. There are things I would fix if it were up to me, but every firm has its oddities I am sure and Jones is no exception. I have 350 households. I beileve he tries to take only $100k plus accounts. He's 55% fee based. The reasons to switch (besides the money) are:


1. Better platform (Judge, I got an overview last week and all I can say is I had to pick my jaw up off the floor)which means more solutions for my clients. 


2. Fee based appeals to me. Jones has MAP, but from what I have seen they have 4 or 5 platforms over there. I would like to go fee based for the people it makes sense for. Jones does everything but discourage it.


3. Health Insurance. Believe it or not, this as a huge deal. Jones has crappy coverage and I have $6000 in medical bills I am STILL paying off to prove it.


4. Long term team prospects. According to the propoganda, teams are 30-40% more prodictive than individual advisors. One day I wake up and I am the lead team mamber of a HUGE book if I play my cards right. This is if it the team works, but he has said he wants to slow down before too long and is looking for someone like me- young (I'm 30) and has demonstrated success in this business.


I don't think I'd lose a ton of accounts. I would lose some I am sure, but thses client are with Jones because of me. I hunted 'em, signed 'em up, and I sold ME, not Jones.  


Bankrep, teams are a no-no at Jones unless you're sunsetting your business through the retirement deal or have some type of special family arrangement. Father/Son. Husband/wife. Mother/Daughter. Those are the only teams I have ever seen at Jones.


Hope that helps.


Rock!


Jul 5, 2006 9:50 pm

And the deal is about $220k cash. 1/9 forgiven every year for nine years.



Jul 5, 2006 9:57 pm

Rockstar, I wouldn't do anything just for the money.  (I'm not suggesting you are, but hear me out.)


Lots of things can go wrong between now and year 9, many of them not of your doing with the team concept that you describe.  Before I jumped, I looked at a lot of deals, and that forgivable loan always made me nervous.  So when I left, I went indy. 


Staying at Jones might be the thing for you now.  But if you're set on going, I think the smart play might be to go with another firm, be it a wire or indy, then look into partnering up.  Remember, the partners are not going to do anything for you unless it's to their benefit.


By the way....I like your tagline!

Jul 5, 2006 10:28 pm
Jul 5, 2006 10:33 pm

Take a look at it this way and see if it helps. 


They are giving you ~25,000  year for the next 9 years, before taxes.  Seems like they are giving you a $2000 a month forgivable draw. I would ask for a higher upfront and a shorter time period.


You are reasonably successful and they want you for a reason...make them work.

Jul 5, 2006 10:53 pm

Here's my 2 cents.  My team is looking at possibly making a jump as well.


#1 - I think you have the right idea about leaving Jones.  The firm doesn't have the capabilities you are looking for with regard to teams and managed money.


#2 - If you hit your goal, the deal is 75% of trailing 12, and that is low.  I would not settle for less than 90 -100%.  Some firms are offering a lot more.


#3 - 9 years is way too long.  I wouldn't go longer than 5 or 6.


#4 - Don't put all your hopes into SB, check out ML or MS, they have great managed account platforms as well.


#5 - Partnering is a great idea, but be cautious of partnering with someone that you don't know very well.  Partnerships can be very profitable for all involved, but they are a lot of work.  Maybe make the jump, and then gradually work into the partnership.

Jul 5, 2006 11:07 pm

Ditto all of the above; you should be able to land 100% for 5 yrs (AND a partnership if you want).  A move would probably be a non-event for your trajectory after a period of several months of getting reestablished.  However, you need to be adequately compensated for taking the risk of moving...if nothing else, the risk that 3, 4, or 5 yrs down the road you won't like what you've got.  If you're paid for that risk, it may be worth taking, but it doesn't sound like you're getting a sufficient "risk premium."  I've been there, done this (from EJ to wirehouse), but got much better compensation (upfront and potential beyond) with not as impressive stats as yours.  Remember, you are playing with a silver bullet--once you move, you can't do it again any time soon (nor would you want to...it IS a pain).

Jul 5, 2006 11:26 pm
Starka:

Rockstar, I wouldn't do anything just for the money.  (I'm not suggesting you are, but hear me out.)

Lots of things can go wrong between now and year 9, many of them not of your doing with the team concept that you describe.  Before I jumped, I looked at a lot of deals, and that forgivable loan always made me nervous.  So when I left, I went indy. 


Staying at Jones might be the thing for you now.  But if you're set on going, I think the smart play might be to go with another firm, be it a wire or indy, then look into partnering up.  Remember, the partners are not going to do anything for you unless it's to their benefit.


By the way....I like your tagline!


Ditto me on the tagline...catchy.


I'm also going to ditto pretty much everything else that Starka said and tell you that I had a similar mindset when I left a bank last summer.  There was no deal out there that was going to buy my freedom for any timeframe, so I likewise foresook the big check and went independent.  When you do the math and look at the difference in payout, I don't believe that there is any deal out there that's not designed for the company to get it back at least twice over.  At the level they've offered you, they'll get that bonus back several times over.  They've essentially offered to increase your payout by about 7% over the next nine years (although I haven't considered the add-on for getting it all up front), and IMO, that's not much in exchange for giving up your freedom.


I'm also very skeptical of partnerships in general, as the majority I've observed end up blowing up over a variety of real and perceived inequities.  Partnerships also make it difficult to move accounts if you later decide the firm you've chosen is not a good fit for you.  The arrangement you've described sounds like a better than typical deal if the senior partner actually follows through as planned, although I am again, skeptical of any promises not reduced to writing.


You're asking the right questions, and it's apparent that your chances of success are high regardless of platform.  No doubt a better platform can do nothing but help, but the best advice you'll get is to guard your freedom carefully...I can't think of any price I'd accept for mine.

Jul 6, 2006 10:48 am

RS, The deal and arrangement as you've presented it exposes you to considerable risk. Why, after bootstrapping yourself up from zero, would you settle for being a second banana? Or is it third banana? Obviously you have the talent, drive and will to build a successful business. Why not build your own team?


There is much that can go wrong with your deal at SB. If it goes wrong getting your book out of there won't be easy. Wirehouse brokers are experts at converting your book to their pocketbook. Most likely, if things don't work out you'll be left with too little to continue in the biz. Then it's off to that failed broker graveyard with you, the used car sales lot.


Most teams are born out of synergy. Two or more brokers already working in the same office decide to launch a joint marketing effort. It grows from there and they team up. They get a free no obligation look see into how they work with their potential partner. If the marriage works they can make it official. As for you, if you know the broker you are considering teaming with go for it. If not and if this is something concocted by the SB folks then pass. Obviously it works for them. They have only upside. It doesn't work for you. You're carrying all the weight.


Work for another five years on your own and then offer the $600k guy a position as your assistant.


And, the front end of the deal, NOT NEARLY ENOUGH!

Jul 6, 2006 1:33 pm
rockstar1:

1) Reading this forum, it seems like a crappy
offer on the financial end of the deal. What should I ask for
considering LOS and considering the fact that I built my book from
scratch? How do I ask without seeming greedy? Any feedback would be
greatly appreciated.



The other posters are right.  You have received a lowball offer.  They
probably believe you'll jump at the team opportunity whatever the
numbers.  It's hard to determine the percentage you'd get without seeing the makeup of your book (some assets are easier to move than others).  If they expect 80% asset retention then they're WAY under-bidding you.


rockstar1:


2) Anybody here have any experience working
with teams? Anybody in the same kind of situation teaming with a senior
advisor? What are advantages/pitfalls/things I have not thought about?



Have you ever been involved in putting together a prenuptual agreement?  This is the same kind of delicate negotiation that MUST be put in writing WITHOUT violating the trust relationship.  Be sure that all promises to you are in writing.  Hopefully you'll work together well and never have to quote the contract to get your due, but it's important to have that fallback position.


rockstar1:

3)finally, going to a wirehouse from the folksy place Jones is makes me nervous. How bad is the culture shock going to be?



This is an important and often overlooked consideration.  Be sure that you spend time with other advisors during the interview process without management present.  You want a meeting where people will really open up and tell the truth without fear of reprisal.  If you don't find that kind of relaxed candor anywhere in the office, then beware.

Realize that cultures vary from branch to branch.  Any advice you'll hear on this board about firm X versus firm Y is entirely subjective and dependent on the local branch culture.



Jul 6, 2006 2:20 pm

why dont you go independent instead?

Jul 6, 2006 8:40 pm

This is some great stuff, eveyone. Thanks so much for the input! A couple more details.


The team is not to begin immediately. I am to go over as a standalone advisor. Getting as many people to go with me as possible is job one. The team is to be formed down the road, perhaps with new clients only on a seperate book from his and my clients. I understand that everything will need to be in writing and I will NOT form a team if it doesn't feel right,


Going independent really appeals to me, but I don't think my business is there yet. My eyes are opening to the way Jones does business and while it is a great place to build a business, I am not sure it's where I want to end up long term.


My inclination now is to stay, keep building my business and think indy when I hit $50 mil or Jones gets old.


I am going to tell SB the deal stinks as it stands and ask for $100% and see what happens.


At the end of the day, I don't really want to leave, but it seems like an interesting proposition. We'll see what happens. I'll let you know.


Thanks and more input is welcome if you want to put in your .02. I'm all ears.


Thanks again!


RS   

Jul 6, 2006 8:50 pm

and BTW, I adapted the tagline from a Don Connelly story I read:


A barber had been in town for twenty years. He charged $14 for a haircut. One day he came to work to see that a new barber shop had opened across the street, sporting a HUGE sign that said, in big red letters: "$6.99 HAIRCUTS".


The old barber stopped, frowned, and thought for a moment. Then he grinned, went inside to made a quick phone call.


The next morning the old barber's first customer was greeted by a sign, that said, in huge red letters:


"I FIX $6.99 HAIRCUTS" 


So I have a sign in my office, in big red letters, that says:


I fix $7.99 trades.


Rock on-


RS

Jul 6, 2006 8:57 pm

If you don't want to leave, why leave?  Believe me, I understand if you really wanted to (no fee-based, etc.), but if it's not in your heart to leave, why go now?


By the way, congrats on your awesome start entering a tough business.

Jul 7, 2006 12:20 pm

you shouldnt be scared of going independent. You can still prospect while your an indy

Jul 7, 2006 1:16 pm
rockstar1:

Newbie to the forum. Been dissecting it for quite some time for info. Here's my question. I am a five year "vet" that started from scratch with everyone's fav firm on this forum, Edward Jones (it's really not as bad as y'all seem to think-the opportunity is what you make of it and they gave me a shot when NOBODY was hiring in 2001). I am pushing $30 mil in assets and my trailing 12 is $340k. I am being recuited hard by Smith Barney and an offer is on the table. Here's the deal:


65% of trailing 12 upfront cash (forgivable over 9 years)


10% restricted stock award at 14 months if 80% of assets follow me.


In addition, I am being asked to join a team with a 25 year vet with $120 mil in assets who is producing $600k. He's still fairly young, but wants me to be part of his "Franchise Protection Plan", i.e. eventually he wants me to take the lead in the team while he fades into retirement and travels with his wife. He is one of the most respected advisors in my town (he was the branch manager of the Legg office that just got sold to SB).


My questions are.


1) Reading this forum, it seems like a crappy offer on the financial end of the deal. What should I ask for considering LOS and considering the fact that I built my book from scratch? How do I ask without seeming greedy? Any feedback would be greatly appreciated.


2) Anybody here have any experience working with teams? Anybody in the same kind of situation teaming with a senior advisor? What are advantages/pitfalls/things I have not thought about?


3)finally, going to a wirehouse from the folksy place Jones is makes me nervous. How bad is the culture shock going to be?


Any help greatly appreciated.


Thanks for the entertaining forum.


-Rockstar





Best of luck to you in your decision making process.  I am at Ray Jay and we have many EDJ guys coming over here.  don't be afraid to shop your offer around.


Could you explain how you have such a high trailing 12?  I thought you were only able to do A shares.  Don't they pay about .25%?


That is only about $75,000 of recurring revenue.  How do you make up the rest? 


You will be soooooo happy to be at a firm where you can do fee based business.  Retirement is close to 30 years for most people.  Fee based fits best, in my humble opinion.


Good luck and keep us informed.