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Jul 3, 2007 4:52 pm

Hey everyone,


I am still relatively new and I was wondering if I could get some advice from the vets on some of the does/donts of this industry when it comes to client allocations.  I know this is very broad and it depends on the individual client, but I am looking for some "rules of thumbs" of things an FA should never do, and things they should do.  Things that are not taught in training and a newbie may over look as they may have the "blinders" on!


all advice is appreciated...even yours bobby!


mooose

Jul 3, 2007 4:59 pm

What do you mean by 'client allocations'?  Please clarify.

Jul 3, 2007 5:40 pm
mooose:

Hey everyone,


I am still relatively new and I was wondering if I could get some advice from the vets on some of the does/donts of this industry when it comes to client allocations.  I know this is very broad and it depends on the individual client, but I am looking for some "rules of thumbs" of things an FA should never do, and things they should do.  Things that are not taught in training and a newbie may over look as they may have the "blinders" on!


all advice is appreciated...even yours bobby!


mooose



Now I feel some pressure to come up with some advice.

Jul 3, 2007 6:02 pm

A couple of simple rules:

1. Never confuse genius with a Bull Market.

2. Bulls will make money.  Bears will make money.  Pigs will lose money.

Jul 3, 2007 6:14 pm
mooose:

Hey everyone,


I am still relatively new and I was wondering if I could get some
advice from the vets on some of the does/donts of this industry when it
comes to client allocations.  I know this is very broad and it
depends on the individual client, but I am looking for some "rules of
thumbs" of things an FA should never do, and things they should
do.  Things that are not taught in training and a newbie may over
look as they may have the "blinders" on!


all advice is appreciated...even yours bobby!


mooose





0) There are several good books on this subject.



and



1) Clients are much more conservative than they think.


Jul 3, 2007 7:41 pm
Bobby Hull:
mooose:

Hey everyone,


I am still relatively new and I was wondering if I could get some advice from the vets on some of the does/donts of this industry when it comes to client allocations.  I know this is very broad and it depends on the individual client, but I am looking for some "rules of thumbs" of things an FA should never do, and things they should do.  Things that are not taught in training and a newbie may over look as they may have the "blinders" on!


all advice is appreciated...even yours bobby!


mooose


Now I feel some pressure to come up with some advice.



LOL, I'm sorry folks, I know Hull is unmerciful in his delivery, but that was hilarious. Thanks for the Hugh Grant one liner.

Jul 3, 2007 8:45 pm

Ask a lot of questions before you take your clients high tolerance for risk at face value. Everyone has a high risk tolerance, until the market goes down.


Dont take on your family and friends for the first year or two.


Other than that, there are no rules of thumb. Everyone is different. However, build a streamlined business. Have an investment matrix, so you dont have to reinvent the wheel each time you get a new client with money to invest. Have 3, 4 or 5 asset allocation models, and decide on a platform/level of service, for different levels of assets. Figure out which model they fit into, then plug in the investments from your matrix


Jul 3, 2007 9:42 pm
pratoman:

Dont take on your family and friends for the first year or two.

I see this advice given frequently, but I honestly don't understand it.  All of my accounts have come from my friends and family, and friends of my friends and family...and I expect to be friends with all of my clients, and treat them all like I would treat my family.

That's my business model.
Jul 3, 2007 10:14 pm
ManagedMoney:
pratoman:

Dont take on your family and friends for the first year or two.


I see this advice given frequently, but I honestly don't understand it.  All of my accounts have come from my friends and family, and friends of my friends and family...and I expect to be friends with all of my clients, and treat them all like I would treat my family.

That's my business model.




IMHO, Most people, not all but most, wont bring in enough money from friends and family to make their career, and if they dont bring in freinds and family, in the beginning, it wont hurt their career either. My feeling is, assuming thats the case, get comfortable with what you do first. Most, again most not all, but most people new in the buseinss, have no idea how much they still dont know about investing  prudently. Just my humble opinion.

Jul 3, 2007 10:55 pm

Always be more conservative than they think you are being.


Stay in control of the situation


Tell them what you ARE GOING to do, as opposed to letting them run the show.



Don't buy CDs....ever.

Jul 4, 2007 5:27 am
pratoman:
ManagedMoney:
pratoman:

Dont take on your family and friends for the first year or two.

I see this advice given frequently, but I honestly don't understand it.  All of my accounts have come from my friends and family, and friends of my friends and family...and I expect to be friends with all of my clients, and treat them all like I would treat my family.

That's my business model.




IMHO, Most people, not all but most, wont bring in enough money from friends and family to make their career, and if they dont bring in freinds and family, in the beginning, it wont hurt their career either. My feeling is, assuming thats the case, get comfortable with what you do first. Most, again most not all, but most people new in the buseinss, have no idea how much they still dont know about investing  prudently. Just my humble opinion.



Thank you for the explanation.  Neither one of those issues applies to me, but I understand how it makes sense in most situations.

Jul 4, 2007 10:00 am

I am also relatively new and I did bring in a few friends (family has no money).  I think the biggest risk of doing either is the fact that most of us newbies won't be here in a couple of years and that will leave our friends and family hanging.


Jul 4, 2007 1:34 pm

Not only that but if you start off prospecting friends and family, you will get comfortable and not learn to prospect properly.


Jul 4, 2007 10:59 pm
STFU:

Not only that but if you start off prospecting friends and family, you will get comfortable and not learn to prospect properly.



If you can build a successful business through friends and family, then you don't need to prospect any other way.

Jul 4, 2007 11:34 pm

Most people can't and the ones that do are in a tiny minority.

Jul 5, 2007 12:50 am

Without question try to stick to 4-5 models you use for various client risk profiles. 

Also, make sure you find out how they define their own investment style.  If they're passive or an active investor.  If they say their active test them a bit to make sure.  Since you are trying to simplify your life and manage a book its much easier to have the passive investors in managed money or funds etc, but the active investor may need individual stocks or a cyclical allocation strategy.  Also, it's silly to force feed trading on a passive investor,even though it may be your style.  Once you know the answer to active or passive it narrows your investment options a bit.  Keep it simple. 

Jul 5, 2007 12:35 pm

Mooose, I like ya' I have an empathy for your position and I have a soft spot for the firm you work for.


"Relatively new" is an understatement for sure, but fine.


Unfortunately, everything that you ought'nt do is everything that your firm is going to tell you to do (including your BOM, most likely because he'll use you to achieve the ridiculous grading rubrick the firm has for his success). Fortunately, just do what they tell you to do (this is why it's best to leave friends and family out of the equation on this see the joke I'm about to post on this subject on weekend joke).


When I got started, I concentrated on dividend paying stocks. Don't go for the 15% ers because there is a reason they are at 15% and it's generally not a good reason. Most people like the idea of getting a chance at growth while they are making more than they could in a cd, especially if there is a good company behind the dividend.


This strategy served me well when the crash of 1987 came along. Most people were realtively ok due to the dividend and the fact that people who owned dividend stocks weren't calling their brokers and selling into the mess (whether they should have been or not is another question).


I'd say hang back from funds because you tend (not you particularly) to overweight a single fund based on the idea that a single ticket buys you diversification. But when it goes down, then the portfolio is overweightedly down.


Mostly, at this juncture it's keep your head down and keep swinging. It's like the first years of college before you really know what you want to be. Stack away the assets somewhere where you can feel they'll be there when you go looking for them again.


Second piece of advice. What you want is the money in the account. If that's 90 day CDs, fine. You want cash where you can call the client with an idea and he doesn't have to decide to send you more money for it (but he always can).

Jul 7, 2007 6:14 pm

Build your business like you want it to be in 10 years.


Work with people you like.


If you get clients who can only meet on nights and weekends you may still be working nights and weekends for years to come.


As far as working with friends and family, fortunately everyone I know personally is broke.  I have heard senior advisors in my office agree and disagree with this approach.  All I can tell you is one of the new guys tried working with a good friend recently and has now lost that good friend.  The best advice I heard from someone who does work with friends and family is to treat them the same as any other client.

Jul 9, 2007 12:57 pm

Stay away from individual stock picks until you earn some stripes.  Do your best for every single client.

Jul 9, 2007 3:05 pm

I disagree VBrainy. If he goes for good, dividend stocks (utilities, pipelines etc, nothing too new, nothing too exotic) he should be ok AND what's nice about stocks is they give you a reason to call on your client again with a second stock and with a third stock and a fourth....


It's not a matter of. "I picked the best one ever!" when you buy a stock, it's a matter of "I think this is timely now." With a fund, you are supposed to have picked the bestest best fund the first time and so why do you have any reason to call again except to say "Gee, why don't you buy some more?" You bought ED with a 5% yield and now you want to add GMR with an 8%, next we'll get KO with a 2.5% then we'll add FCH pr A with 7.3%." (Not that I'm saying that anyone should buy any of these particular names.) None of these calls requires selling the previous stock.