How big is too big?

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Dec 27, 2005 1:42 am

I've read some opinions that in the bank broker world one of the risks is getting to be too big a producer.   When/if this happens the bank execs will start splitting up your book to avoid this from happening for whatever reasons (jealousy, streamlining, etc)


What asset and production level might this start happening?


2006 begins my second year in my practice so i'm hardly worried about this at this juncture.    In my fee based biz I have opened every account and zero were handed to me from another book.   Still, I am concerned a few years from now they will make me hand some of my accounts to some new hire which probably would make no sense for anyone involved.


Any words of wisdom would be appreciated.


Scrim

Dec 27, 2005 7:47 am

Around 1 million.

Dec 27, 2005 10:34 am

Scrim,


get to the magic 3-4 year mark of successful, consistent production. Then look around and get out of the bank to a firm where you can grow your business without having to worry about issues like that....

Dec 27, 2005 11:26 am

Blarmston,


One roadblock would be that since I'm mostly doing fee based in a proprietary mutual fund wrap program it will be much more difficult to have clients move with me since they can't be ACAT transferred to my knowledge.    I knew this fact from the get go.


I really have no plans in moving for the forseeable future.     I am the type of person who would rather stay in one place for a long time as opposed to jumping around anyway.


scrim

Dec 27, 2005 11:34 am
scrim67:

Blarmston,


One roadblock would be that since I'm mostly doing fee based in a proprietary mutual fund wrap program it will be much more difficult to have clients move with me since they can't be ACAT transferred to my knowledge.    I knew this fact from the get go.


I really have no plans in moving for the forseeable future.     I am the type of person who would rather stay in one place for a long time as opposed to jumping around anyway.


scrim



Never use proprietary products where ever you work! This will cost you big time some day! 

Dec 27, 2005 11:43 am

In my case I have no choice for my mutual fund wrap program.


Just for clarification my company's mutual fund wrap program only uses outside fund companies;  American, Fidelity, TRowe, etc etc.


Dec 27, 2005 12:04 pm

"In my case I have no choice for my mutual fund wrap program"


yeah.... exactly.....

Dec 27, 2005 12:33 pm

Scrim,


We started getting screwed at about $250K-$300K/year gross.  As far as your mutual funds, those can't be ACAT'ed, but they can certainly be transferred.  Anyone telling you otherwise is full of crap.  I dealt with the same issue this summer and transferred millions out of a similar program, but it was done manually...not under an ACAT agreement.


I too, felt like I was a long-term employee...even harbored some very naive retirement expectations, but getting hosed a few times by management can really change you outlook!


I'll be interested in hearing your opinion in another 3-4 years, because if it is as positive as it is today, you have a very special situation.

Dec 27, 2005 12:44 pm

From what I gather the minimum expectations here are 30k/mo or 360k annually so I would think you would get on the "radar" somewhere north of that.      I'm thinking once you get to 500-600k per year they might take a look at your practice and see if they think you can provide the appropriate service at that level.


Based on my own projections I might be able to get to that level in 2008.    It will be a happy problem for me once I get there as I've always lived at or below my means and I'm not in this just for the money.


scrim



Dec 27, 2005 5:19 pm

I am concerned a few years from now they will make me hand some of my accounts to some new hire which probably would make no sense for anyone involved.


This isn't always a bad thing. It makes a lot of sense to me.  If you have too many accounts to be able to adequately take care of, you can hand off the lower yielding clients to someone who has time to farm them properly.  Then you can concentrate on more prospecting and deepening your relationships with your higher net worth clients instead of being spread too thin and not being able to pay attention to anything.  If I were a client, I'd rather have the full attention of my broker instead of being one of thousands of clients who get a wham bam thank you ma'am appointment once or twice a year.


I think you are confusing too big "income" with too big "book of clients". 

Dec 27, 2005 5:24 pm
blarmston:

Scrim,


get to the magic 3-4 year mark of successful, consistent production. Then look around and get out of the bank to a firm where you can grow your business without having to worry about issues like that....




That is about how long things worked our for me. Now I am going indy next week.


You just reach a point where things dont make sense anymore in the bank environment. Sales managers are NEVER happy, they already want pipelines for Q2 for '07 and this year hasnt ended yet. I am always pipelining, I understand the importance of prospecting and being active, but trying to predict business 120 days from now is kind of silly. This of course is just one issue, and a peeve of mine. You are still in the beginning stages, just remember begin with the end in mind.

Dec 27, 2005 6:20 pm
Indyone:

Scrim,


We started getting screwed at about $250K-$300K/year gross.  As far as your mutual funds, those can't be ACAT'ed, but they can certainly be transferred.  Anyone telling you otherwise is full of crap.  I dealt with the same issue this summer and transferred millions out of a similar program, but it was done manually...not under an ACAT agreement.


I too, felt like I was a long-term employee...even harbored some very naive retirement expectations, but getting hosed a few times by management can really change you outlook!


I'll be interested in hearing your opinion in another 3-4 years, because if it is as positive as it is today, you have a very special situation.



Ultimately it's about the $$, and when that revenue stream gets big enough it appears that bankers are pretty good at trying to figure out ways to get a bigger piece of it.  Ironically, the wires realize that the big producers are far more profitable, so they actually give them higher payouts and work hard to keep them happy.  It seems the banks do the exact opposite.  Weird...

Dec 27, 2005 8:12 pm

scrim,


I think it depends on where you work.  In my program there are several producers doing north of 1 mil and they get nothing but support and encouragement, one recently let go of all his branches for an enhanced payout.  I also know of a gal at bank one /JP Morgan doing between 3 -4 Million in revenue (highest I have ever heard of out of a cube! :)  ) and they stay out of her way from what I understand.


I think it is how you position yourself, get to know the big dogs on trips, don't kiss their butt as I am sure some smart as@ is abbout to chime in with that.  If your a player in this game you'll figure it out one way or another.  Best of Luck.. 


Mar 11, 2006 4:12 pm
joedabrkr:
Indyone:

Scrim,


We started getting screwed at about $250K-$300K/year gross.  As far as your mutual funds, those can't be ACAT'ed, but they can certainly be transferred.  Anyone telling you otherwise is full of crap.  I dealt with the same issue this summer and transferred millions out of a similar program, but it was done manually...not under an ACAT agreement.


I too, felt like I was a long-term employee...even harbored some very naive retirement expectations, but getting hosed a few times by management can really change you outlook!


I'll be interested in hearing your opinion in another 3-4 years, because if it is as positive as it is today, you have a very special situation.



Ultimately it's about the $$, and when that revenue stream gets big enough it appears that bankers are pretty good at trying to figure out ways to get a bigger piece of it.  Ironically, the wires realize that the big producers are far more profitable, so they actually give them higher payouts and work hard to keep them happy.  It seems the banks do the exact opposite.  Weird...



They do the opposite because the bank rep is more of an order taker type job.  He's not producing his own leads, most likely.  So why not divide the book of business, you diversify to reduce your loss if he leaves.  It makes the assets more likely to stay.


Ace


Mar 11, 2006 5:49 pm

How big is too big?


I've heard that it's impossible to be too big, and there is no penalty too severe for premature withdrawal.


But that's only a rumor.