Wealth and the Stockbroker

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Sep 5, 2006 4:34 pm

It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 


However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 


I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.


Most made money in 1 of 2 ways.  Self employed business owner or real estate.


The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.


That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.


It astounds me to see the type of money being made.


Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time


Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.


Sep 5, 2006 4:36 pm

Sorry, I put up this message in spurts while doing other things.  As I was proofreading I see I made a couple errors.  Bring on the grammatical firing squad.

Sep 5, 2006 4:56 pm

Your observations are true in my experiences as well.  Though you should also include inheritances as well. The brokerage business can provide excellent cash flow, but rarely provide true wealth over time.


As an FA, I think our job with these types of individuals is simply to make sure their cash is working hard for them (i.e. muni's). Generally, I recommend against the ultra-wealthy from investing in stocks, unless they truly enjoy the markets and want to open the casino for a (very) small portion of their $.  My opinion is that they've already made the $, so preserve it. Why take the risk?

Sep 5, 2006 5:22 pm
BankFC:

Most made money in 1 of 2 ways.  Self employed business owner or real estate.


I would agree.  I don't know anyone who became filthy rich by investing in the stock market.




Sep 5, 2006 5:49 pm

I think your post has some relevance to it.  However, why would anyone come see YOU if they have made a fortune in the market?  That is no diss on your or anyone, but if a guy had make all of his wealth from brilliant investing in equities, why is he seeking your (or anyone else’s) advice?  Wouldn't he stick with the guy that made him all the money, or himself if he was the one who chose his investments.  <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />


I'm in no way saying we can not help these people, but someone who has had that much success would generally not be out looking for someone new unless he is mad at his broker.  Most people don't get mad at brokers who make them millionaires though. 


I guess you could find them if you offered a very specialized service that their current broker doesn't offer. 

Sep 5, 2006 7:26 pm

Interesing views here...


I would submit that the reason that this business rarely provides wealth for us is that too many of us want to spend it before we have it.  We have an image to uphold.  We want to reward ourselves for all of our hard work.  We want to buy pricey, but small and useless dogs.  The trophy wife is expensive to maintain, etc.,etc.,etc.


As far as "rich" goes, it all depends upon the yardstick used.  If getting to $1 mil is "rich", I'm there now, and I'm a long way from retiring.  With a little discipline, a million dollars is not at all difficult to achieve using today's numbers.  If rich is $20-30 million, then no, I probably won't get there but who knows...I haven't sat down to work through the compounding of earnings calculation.


I am self-employed and I have and do dabble in real estate (with mixed results).  Given that I'm new to the self emplyment gig, and my success in real estate has been limited, I'll submit myself as a posterchild that you can accumulate a mil in this business.  I'd venture to guess that many million dollar producers retain several times that.  I can tell you that some of my competitors are without a doubt, millionaires, and I'm guessing that most of them will be by the time they retire.  If you're seeing a lot o advisors that will not retire with even one million dollars, I will submit that either they are not very successful as advisors or they have a woefully inadequate spending discipline.


Judge,  I'm curious as to how you came to the capital preservation strategy.  I know the wealthy have plenty of margin for error, but isn't it our mission to attempt to grow that capital as far as we reasonably can?

Sep 5, 2006 8:31 pm

I do have one client who I would consider "rich" as a result of investing in the stock market.  I always say that he lived the mountain chart so many mutual fund companies like to use in their marketing pieces.  As a young man and bachelor, he was a very dedicated saver.  He invested his first money in the stock market in 1934.  He served in WWII as a relatively older soldeir, but did not cash most of his GI paychecks.  At the end of the war, he invested that money, too. 


Today, he is almost 90 years old, and still sharp as a tack.  He holds about 40 equity positions.  He can probably recite 37 of them from memory on a moment's notice.  He knows approximately how many shares of each that he owns, the current dividend yield, about what his basis is in each position, etc., etc.  He has gifted millions of dollars in the past several years to The Boys and Girls Clubs, UNICEF, Project Smile, The Fellowship of Christian Athletes, and his church just to name a few.  He is not a college graduate. 


In case you're wondering, his most recent purchase was Ford (F)--against my advice.  He is already up significantly from his purchase price.  A good knack for the market doesn't hurt, either.

Sep 5, 2006 8:43 pm
Soothsayer:

I do have one client who I would consider "rich" as a result of investing in the stock market.  I always say that he lived the mountain chart so many mutual fund companies like to use in their marketing pieces.  As a young man and bachelor, he was a very dedicated saver.  He invested his first money in the stock market in 1934.  He served in WWII as a relatively older soldeir, but did not cash most of his GI paychecks.  At the end of the war, he invested that money, too. 


Today, he is almost 90 years old, and still sharp as a tack.  He holds about 40 equity positions.  He can probably recite 37 of them from memory on a moment's notice.  He knows approximately how many shares of each that he owns, the current dividend yield, about what his basis is in each position, etc., etc.  He has gifted millions of dollars in the past several years to The Boys and Girls Clubs, UNICEF, Project Smile, The Fellowship of Christian Athletes, and his church just to name a few.  He is not a college graduate. 


In case you're wondering, his most recent purchase was Ford (F)--against my advice.  He is already up significantly from his purchase price.  A good knack for the market doesn't hurt, either.



How old do you think he was in World War II?

Sep 5, 2006 9:27 pm

About 30 years old.  Why do you ask?  And, BTW, where is my prize for winning your "where in the world was this picture taken" contest?

Sep 5, 2006 10:10 pm
Indyone:

Interesing views here...


I would submit that the reason that this business rarely provides wealth for us is that too many of us want to spend it before we have it.  We have an image to uphold.  We want to reward ourselves for all of our hard work.  We want to buy pricey, but small and useless dogs.  The trophy wife is expensive to maintain, etc.,etc.,etc.


As far as "rich" goes, it all depends upon the yardstick used.  If getting to $1 mil is "rich", I'm there now, and I'm a long way from retiring.  With a little discipline, a million dollars is not at all difficult to achieve using today's numbers.  If rich is $20-30 million, then no, I probably won't get there but who knows...I haven't sat down to work through the compounding of earnings calculation.


I am self-employed and I have and do dabble in real estate (with mixed results).  Given that I'm new to the self emplyment gig, and my success in real estate has been limited, I'll submit myself as a posterchild that you can accumulate a mil in this business.  I'd venture to guess that many million dollar producers retain several times that.  I can tell you that some of my competitors are without a doubt, millionaires, and I'm guessing that most of them will be by the time they retire.  If you're seeing a lot o advisors that will not retire with even one million dollars, I will submit that either they are not very successful as advisors or they have a woefully inadequate spending discipline.


Judge,  I'm curious as to how you came to the capital preservation strategy.  I know the wealthy have plenty of margin for error, but isn't it our mission to attempt to grow that capital as far as we reasonably can?



I'll second that.   Some of the spending habits of the advisors I've known over the years are incredibly poor.  When the markets are good they live according to the size of their last paycheck, and when markets are bad they have to hustle like hell to keep up the payment on their BMW.

Too, I've noticed many advisors sadly don't follow their own investment advice and strategies.  They get caught up in stupid speculative plays.  I have, at times, been guilty of this.  I resolved, however, that I would focus more on eating my own cookin' a few years ago, and it's served me very well.

Sep 5, 2006 10:36 pm

My office has a bunch of reps that have piles and piles of MER with
basis of a couple bucks...all well beyond 7 figures.  I am not
saying this is the way to go, but it is fact right now anyway.




Sep 5, 2006 10:51 pm

That just proves that millionaire advisors are far more common than once thought...

Sep 6, 2006 9:02 am

I see wealthy older brokers who have worked hard.


I see young idiotic brokers making alot of money and spending it all.

Sep 6, 2006 9:40 am
BankFC:

It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 


However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 


I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.


Most made money in 1 of 2 ways.  Self employed business owner or real estate.


The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.


That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.


It astounds me to see the type of money being made.


Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time


Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.




You don't have experience in this business. YOu are a bank employee. YOu are not in any business. The bank is in this business.

Sep 6, 2006 10:24 am

My observations largely confirm your statement.  I of course can think of many exceptions but looking at those who I know I would estimate that more than 50% made their “fortunes” through self-employment or real estate.  Another large chunk of the ultra high net worth individuals made their fortunes through stock options granted while serving long tenures at large multi-national corporations.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />


 


I don’t necessarily agree that we can’t become “rich” as financial advisors.  Maybe my office is an exception, but the majority (my guess is 90%) are receiving compensation in excess of $200K/year with some even as high as the seven-figures.  While $200K/year may not make you “rich” it is certainly better than the average salary in corporate <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />America.


 


--WM

Sep 6, 2006 12:05 pm
knucklehead:
BankFC:

It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 


However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 


I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.


Most made money in 1 of 2 ways.  Self employed business owner or real estate.


The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.


That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.


It astounds me to see the type of money being made.


Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time


Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.




You don't have experience in this business. YOu are a bank employee. YOu are not in any business. The bank is in this business.



You are an idiot.  This thread was about as civilized and smut free as I have seen in awhile, and then you come along and show your lack of a brain.


Not worth my keystrokes.

Sep 6, 2006 12:07 pm

I appreciate everyone else's point of view! 

Sep 6, 2006 3:30 pm

knucklehead is a good handle for you, but I like wasteofskin better.


A Financial Advisor can work in many channels, the bank is just one example.


Did you know you can be a LPL rep and work in a bank? dork

Sep 7, 2006 12:21 am
BankFC:
knucklehead:
BankFC:

It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 


However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 


I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.


Most made money in 1 of 2 ways.  Self employed business owner or real estate.


The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.


That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.


It astounds me to see the type of money being made.


Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time


Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.




You don't have experience in this business. YOu are a bank employee. YOu are not in any business. The bank is in this business.



You are an idiot.  This thread was about as civilized and smut free as I have seen in awhile, and then you come along and show your lack of a brain.


Not worth my keystrokes.



Hey pooh-pooh head...first you said "all snide comments are welcome." Second...what did I say that is NOT true? Here's a hint...it rhymes with "nothing."

Sep 7, 2006 12:26 am
vbrainy:

knucklehead is a good handle for you, but I like wasteofskin better.


A Financial Advisor can work in many channels, the bank is just one example.


Did you know you can be a LPL rep and work in a bank? dork



May I suggest you carefully read what I wrote so you don't have to prove to the world that you are a moron? By the way...your mom needs a bath. Sorry.