Pool Split ML Firm Policy?

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Mar 29, 2007 10:33 pm

I'm in discussions to join a group at ML. Would be a new career. 4 months of discussions, plus a meeting with POA manager and no mention of pool splits. Then POA manager and group meet and turns out that any assets they give me would be split 70/30(me/them 1st yr), 60/40 (2nd yr), 50/50 then on. Group states that POA Manager said it is policy and there is no negotiating this, although no mention until now. Seems fishy, although I believe the group is telling the truth. It is the POA Mgr that I'm not sure about.  I should mention I am friends with someone in the group.


The group has been looking to fill this position for a number of years.  Have gone through a number of people with no success.  They have a real need to unload approx 10AUM/7Annuitized, but the split ensures I would basically be going through the program without help.  Really makes hitting production much more difficult.


Anyone know if this is actually ML policy?  Apparently it was not a policy just a year ago when they were in serious interviews with someone else.


The group doesn't like it, I don't like it and it was sprung on both of us at the last second.  Would it be wrong to confront the Mgr and ask for this policy in writing?

Mar 30, 2007 1:28 am
mkd1919:

I'm in discussions to join a group at ML. Would be a new career. 4 months of discussions, plus a meeting with POA manager and no mention of pool splits. Then POA manager and group meet and turns out that any assets they give me would be split 70/30(me/them 1st yr), 60/40 (2nd yr), 50/50 then on. Group states that POA Manager said it is policy and there is no negotiating this, although no mention until now. Seems fishy, although I believe the group is telling the truth. It is the POA Mgr that I'm not sure about.  I should mention I am friends with someone in the group.


The group has been looking to fill this position for a number of years.  Have gone through a number of people with no success.  They have a real need to unload approx 10AUM/7Annuitized, but the split ensures I would basically be going through the program without help.  Really makes hitting production much more difficult.


Anyone know if this is actually ML policy?  Apparently it was not a policy just a year ago when they were in serious interviews with someone else.


The group doesn't like it, I don't like it and it was sprung on both of us at the last second.  Would it be wrong to confront the Mgr and ask for this policy in writing?



They're not hiring you to give you assets from the group.  They're hiring you to bring in new assets to the group.  Basically, the way it usually works is these teams/groups bring in a new guy who busts his butt trying to hit his numbers but ultimately fails, and then 100% of the assets that he did bring in go to the group, while he goes looking for another job....thank you very much.

Then they find a another sucker and start another cycle all over again.

By the way, in the Morgan Stanley training program, new guys aren't allowed inherited assets at all until their 13 month in production, and even then, none of the inherited assets count towards AUM.  Only the production from those assets count.

Mar 30, 2007 6:56 am
ManagedMoney:
mkd1919:



They're not
hiring you to give you assets from the group.  They're hiring you
to bring in new assets to the group.  Basically, the way it
usually works is these teams/groups bring in a new guy who busts his
butt trying to hit his numbers but ultimately fails, and then 100% of
the assets that he did bring in go to the group, while he goes looking
for another job....thank you very much.

Then they find a another sucker and start another cycle all over again.

By
the way, in the Morgan Stanley training program, new guys aren't
allowed inherited assets at all until their 13 month in production, and
even then, none of the inherited assets count towards AUM.  Only
the production from those assets count.





There may not be a reason to be so cynical.



I run our POA program, and while I have heard of such things, I have
yet to find an actual case, past or present.   When we see
teams asking to bring in a POA, which is very rare in our case, it has
always been done with thought ethical intentions.  We asure it
with the teams well in advanc of them making the arrangements.



A team will bring in a POA for a number of valid reasons.  They
may have a need that is different than asset gathering: Make smaller
relationships better; Handle marketing, operations, and internal sales;
Portfolio analysis; Any number of things. 



ML is now discouraging teams from hiring people for salary for just
these purposes (Invstment Assosiate).  The POA program allows for
a team to get a qualified person in and trained on ML's dime, with very
nominal give-back in the form of the pool split to assure the POA hits
the goals during the first 18-24 months.  At the end, when the
salary is done, a "final" split is in place to provide the comp to the
POA, and if the economics worked properly...the value added by the POA
has exceeded the juice the team has given up by the split...everyone
wins.



As for a formal policy on the splits?  Nope.  Perhaps there
are local or regional policies you are dealing with, but nothing firm
wide.  Just get it all in writing and know what the divorce would
look like if it did not work out. 


Mar 30, 2007 9:58 am

rightway:

A team will bring in a POA for a number of valid reasons.  They may have a need that is different than asset gathering: Make smaller relationships better; Handle marketing, operations, and internal sales; Portfolio analysis; Any number of things. 

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This is partially the reason why they are looking for someone.  They say they have approx 60 - 70 accounts around 100 to 200K which they do not have the time to spend on.  They want someone to take on these clients and cultivate the relationships.


rightway:

I run our POA program,...


What region of the country are you in?


rightway:

As for a formal policy on the splits?  Nope.  Perhaps there are local or regional policies you are dealing with, but nothing firm wide.  Just get it all in writing and know what the divorce would look like if it did not work out. 


This is where I am skeptical.  The POA Manager did not mention the splits to me...only after he met with the group.  The group (remember – one member is a close friend) said he talked to the Manager and he said the pool split is firm policy and there is no negotiating that.  I would imagine if it was a local/regional policy, it could be negotiated.  The split is already a deal breaker.  If you say it’s not policy and he says it is…how do I know who is on target?  If it is truly not policy, I have no qualms about calling his bluff. 


Ultimately this is a business negotiation…they do say this is a small business…what better way to display that than in tough business negotiations.

Mar 30, 2007 11:30 am
mkd1919:

rightway:

A team will bring in a POA for a number of valid reasons.  They may have a need that is different than asset gathering: Make smaller relationships better; Handle marketing, operations, and internal sales; Portfolio analysis; Any number of things. 


This is partially the reason why they are looking for someone.  They say they have approx 60 - 70 accounts around 100 to 200K which they do not have the time to spend on.  They want someone to take on these clients and cultivate the relationships.


[quote=rightway]I run our POA program,...[/quote]


What region of the country are you in?


[quote=rightway]As for a formal policy on the splits?  Nope.  Perhaps there are local or regional policies you are dealing with, but nothing firm wide.  Just get it all in writing and know what the divorce would look like if it did not work out. 
[/quote]


This is where I am skeptical.  The POA Manager did not mention the splits to me...only after he met with the group.  The group (remember – one member is a close friend) said he talked to the Manager and he said the pool split is firm policy and there is no negotiating that.  I would imagine if it was a local/regional policy, it could be negotiated.  The split is already a deal breaker.  If you say it’s not policy and he says it is…how do I know who is on target?  If it is truly not policy, I have no qualms about calling his bluff. 


Ultimately this is a business negotiation…they do say this is a small business…what better way to display that than in tough business negotiations.



If you think someone in management is LYING to you about the split being firm policy THAT SHOULD BE A DEAL BREAKER!  Think about it...they're trying to pull the wool over your eyes and you don't even work there yet!

Mar 30, 2007 12:57 pm
mkd1919:

rightway:

A team will bring in a POA for a number of valid reasons.  They may have a need that is different than asset gathering: Make smaller relationships better; Handle marketing, operations, and internal sales; Portfolio analysis; Any number of things. 


This is partially the reason why they are looking for someone.  They say they have approx 60 - 70 accounts around 100 to 200K which they do not have the time to spend on.  They want someone to take on these clients and cultivate the relationships.



So you're telling me that you aren't going to be required to bring in new assets yourself?  At MS, inherited accounts do not count towards AUM.  Even if you get the existing clients to add more money to their existing accounts, those new assets are credited to the original advisor.  The production is credited to the new advisor, but the assets aren't.

Mar 30, 2007 1:06 pm

I would still be required to obtain enough assets to pass the POA and most importantly enough assets to live.  Although it will help to get through the POA program, that will not provide enough income to live.

Mar 30, 2007 3:53 pm

Pool splits have no "mandatory" structure.  Whoever told you they aren't adjustable is full of malarky.

Mar 30, 2007 4:33 pm
entrylevelFA:

Pool splits have no "mandatory" structure.  Whoever told you they aren't adjustable is full of malarky.


How do you know this?  Are you in management?  Are you involved in making policies?  Do you work for ML?  It seems like this guy has a very good opportunity in front of him, yet this split sucked the life out of it and makes the deal almost worthless, expect it'll get him through the first few months.

Mar 30, 2007 6:17 pm
doubletake:
entrylevelFA:

Pool splits have no "mandatory" structure.  Whoever told you they aren't adjustable is full of malarky.


How do you know this?  Are you in management?  Are you involved in making policies?  Do you work for ML?  It seems like this guy has a very good opportunity in front of him, yet this split sucked the life out of it and makes the deal almost worthless, expect it'll get him through the first few months.



You have an awful lot of questions and opinions for a guy making his first post!

Mar 31, 2007 9:22 am

A few years ago we hired someone into POA with no industry
experience.  We gave them a salary for 18 months and made sure
they hit all of the asset hurdles by working with the splits. 
They were and are responsible for more office related tasks, not
sales.  They got all of the bonuses and in the end became part of
the pool of the team, which we negotiate annually with them.  They
have more than paid for themselves and enjoy a nice job they otherwise
never would have.  I feel good, they feel good, and the clients
are better off for their work. 



I agree with the comment about management not being truthfull right off
the bat...but consider the fact you will be working with the team, NOT
the manager, and the POA coach is probably NOT a manager.  The POA
coach has virtually NO direct power over policy, only
influence...influence that would be far less impactful than that of the
team. 



Managers and coaches come and go, your team and clients are what matters...never, ever forget that.

Mar 31, 2007 6:04 pm
rightway:

A few years ago we hired someone into POA with no industry
experience.  We gave them a salary for 18 months and made sure
they hit all of the asset hurdles by working with the splits. 
They were and are responsible for more office related tasks, not
sales.  They got all of the bonuses and in the end became part of
the pool of the team, which we negotiate annually with them.  They
have more than paid for themselves and enjoy a nice job they otherwise
never would have.  I feel good, they feel good, and the clients
are better off for their work. 



I agree with the comment about management not being truthfull right off
the bat...but consider the fact you will be working with the team, NOT
the manager, and the POA coach is probably NOT a manager.  The POA
coach has virtually NO direct power over policy, only
influence...influence that would be far less impactful than that of the
team. 



Managers and coaches come and go, your team and clients are what matters...never, ever forget that.



I'm curious.  What's the difference between hiring a guy like that versus just hiring an assistant, and letting the assistant get licensed?

Mar 31, 2007 11:55 pm

Good question.  In our case, we had 2 assistants paid for by the
firm.  So ML would not pay this person, while they will pay the
POA for a time. When you want an extra person not paid by the firm, you
have to pay a premium on the salary of the assistant to cover insurance
and such (up to 150% ot their actual pay!). 



The role we filled was not that of an assistant anyway.  This
individual manages about 75 households, does a great deal of our equity
research, manages the assistants, and runs alot of our marketing.