Tuesday...Start Earning Your Money

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Sep 30, 2008 9:41 am

After my day at work I returned home and as mentioned had a couple of Bushmills and reflected upon the events of yesterday.

For members who have been through some corrections and survived perhaps an opportunity to advise some of the newer members on " righting your client's ship ".
I recall the High Tech Demise very well and how the valuations and P/E ratios were completely out of whack. As you recall - " the old way of pricing shares was passe" , " with technology companies you can't apply the traditional valuations " these were the type of statements being tossed about everywhere.
Call me simple , but I could never understand the concept of buying something that had no assests and the dream was being sold as the " Future ". I understand what Proctor & Gamble , Bank of Nova Scotia , Unilever , Heinz and similar companies do and what they are valued at in the market. My approach then and now is understand and stay what makes you and your client/s are comfortable with and don't deviate. I had clients and referrals saying but " I want to double or triple my money in six months or a year ". Look I have a friend that has made a fortune " Playing " the market. I am more than thankful my clients followed my advise or my luck and stayed the course. I am sure that I perhaps lost potential clients because I was not comfortable with their demands and expectations. In the end my clients and I weathered the storm.
In the current situation , the Financial Institutions are the face of some fundemental problems and this will be a period of adjustment. Look around .....young people out of school and working for a year driving 60-70K vehicles , taking expensive vacations and a host of other pleasures that must be earned not based on entitlement. look at the growth of the Civil Service at all levels ( my prediction these people are also going to be finding a new reality ).
Today is another day and I will be earning my money by providing the service and value that they deserve.
Sep 30, 2008 10:17 am

Good post Norway, I had a sit down with the wife last night and told her that this was our chance to improve on some of our own financial matters, no excuses. We can not ignore the hardships around us.

 
Yet at the same time, I have been busting arse to get new money. even if new money comes in, I don't have the bleeding heart to dump all investable assets into investments all at once because I think it is the wrong thing to do for the clients in these markets. As a result, my income has been hurtin' and I'm at a point where I have to reevaluate my position of this industry.  It's a real bad feeling to love servicing your clients but having to dip into your savings to survive to do it.
 
I don't know.
Sep 30, 2008 11:44 am

Yes. This is when we earn our money and prove our worth.  I'm sending out market volatility letters.....again.  Did it last month and got very little response. And calling clients.   It's important to stay in touch even if we do nothing with the client's portfolios.   Holding hands and being a calm voice.  Remember that most of the news our clients hear is from the hysterical talking heads on television.

 
Thank God my husband has a job/business that everyone needs no matter what the market conditions.  Because my pipeline is just about down to a trickle with the exception of a few fixed annuities from cash on the sidelines.
Sep 30, 2008 11:58 am

Guys and Ladies ...... for those that are new and even those that have been around the block for awhile....yes it is " hurtin time for both you and your clients ". All that being said , if you have a diversified practice with a broad product shelf ( yes that DOES INCLUDE Insurance products ) you are able to build a sound Financial Plan for your clients.

Please do understand I a definitely not making light of the situation but for the FA and Client you need to be able to focus on a plan that guides you/client through the sound concept of a Financial Plan versus Playing the Market.
Sep 30, 2008 1:03 pm

Good post norway. While my income has been down the past 2 months, it isn't enough to affect my lifestyle. Have my clients lost some money on paper, yes. I laugh sometimes when we complain about our clients wanting to sell when the stock market goes down and then you see posts on this forum from advisors and brokers wondering if it is time to sell and move to cash. You had that opportunity when the Dow crossed 14500 and the Nasdaq 5000 but i bet no one did. I think sometimes we forget what we get paid for, sound advice that needs to adjust base on what we see on the economic horizon. The buy it and forget it days have been over for a long time not just for investments, but also investment plans.

Sep 30, 2008 2:31 pm

"even if new money comes in, I don't have the bleeding heart to dump all investable assets into investments all at once because I think it is the wrong thing to do for the clients in these markets."

 
I'm piggybacking on you statement, Anabuhab, but this is really directed towards all of us and not just you.  There just seems to be something very dangerous in this statement.  To me, it's as if you are saying and others are thinking, "Because times are crazy, I just don't know what tomorrow will bring."   This is very true. 
 
The problem lies in the fact that when things aren't crazy, we still don't have a clue as to what tomorrow wil bring.  We never know what these markets happen to be.  We just know yesterday's markets.    The market goes up more often than it goes down.  This means that if you don't invest investable assets for your clients today, more often than not, you will be hurting your client.
 
There's a reason why investors way underperform their funds.  We're part of the problem.  We're all happy to invest when the market is up.  We're all scared to invest when the market is down.
 
I take a lot of comfort in knowing that I don't have a clue as to what the market will do.  If I did, as I tell my clients, I would be on my yacht and not talking to them.  Over the long haul, I firmly believe that we will hurt our clients if we make decisions based upon our perceptions of what will happen in the market.  I see absolutely no reason to make financial decisons based upon guesses on the future market instead of the risk tolerance and time horizons of our clients.
 
My practice thrives on cans of tuna fish.  "Mr. Client, with your $10, would you rather buy 8 cans of tuna fish or 12 cans of tuna fish?  Your $10 used to buy 8 cans.  Now it buys 12 cans.  Would you rather your $10,000 buy 120 shares of XYZ or buy 80 shares of XYZ? "   It's the same thing!  The price of tuna or the value of your investments has no relevance until it's time to use this money.
 
Let's put it another way.  It's fine to not want to invest when prices are down and we are going through periods of craziness.  However, if that's the case, that type of person should NEVER be an investor because long term their rates of return are going to be no better than a saver.
Sep 30, 2008 2:33 pm

buy it and forget it days have been over for a long time not just for investments, but also investment plans.

 
The "buy it and forget it days" have never been here which is why the average investor underperforms by such a large margin. 

 
Sep 30, 2008 2:47 pm

Ditto Anon on your overview. If you / me or anybody knew what tomorrow will bring we would be sitting in a warm climate and enjoying life. Absolutely correct in " buy it and forget it days " in my experience they were never here.

Have seen a vast number of FAs come and go ..... they actually believed that or thought they could churn ( I am being very polite ). For the Investor and the FA this is about strategy and understanding risk/rewards. Asset gathering is fine BUT now the difficult task of directing the monies to where the Client and FA need to get to attain the objective/s.
Simple ....not very likely but that is the ultimate goal/objective.
Sep 30, 2008 3:35 pm

I see things much more simplistically. Just buy everyday. Today is always the best day to buy. Why do I feel this way? Simply I can't predict the markets. A year ago I wasn't smart enough to know yesterday would be a 700 point down day. So I buy on a case by case basis guided by the client's needs not on what I beleive the markets will or won't do. Luckily for me even the guys we pay millions of dollars to can't predict markets. So it kinda works out in the end. If i can't predict something why worry about it?  More importantly why try to use it to build a business?


Ana, this is for you an everyone else who is having net capital months. That is, a month where you need to dip into your savings ie  net capital to make it through the month. I'm here to tell you that this meltdown is career maker, or saver for you. Right now in little offices around your town, region, market area, advisors are paralized. They don't know what to do. Likewise your town is filled with unhappy clients. Not your clients, their clients. They are unhappy because Mr. Paralized isn't calling them. The knocking sound you are hearing isn't your career sputtering to a halt, it's opportunity knocking! All you have to do is pick up the phone. Ask these two questions:


Are you happy with your porfolio's performance?
 
Are you happy with your advisor?
 
Get a no to either then ask for an appointment. It really is that simple.
 
Give it three months. Three months of working like you've never worked before. if you are putting in 50 hours a week, make it 60. If already 60, make it 70. You get the point. Call every Rotary club within 50 miles. Or make it 100 miles. Offer to talk to them about the meltdown and the opportunities it has created. Or talk about tax free bonds. Book two or three talks a week. Your price, a list of attendees with phone numbers. At each talk you make it clear that you are not there to sell them anything. but, if anyone would like a free financial check up, just fill out this sheet. The sheet will ask for their name address etc. Believe me, you will be sought after. How about the church clubs in your town. All those breakfast meetings? Any accountants in town who might like to know what this about? If you work in an office building a box lunch meeting "What to do next" for the owners or managers of other businesses in the building/complex/park. Then there is cold calling. get on the phone.
 
It's ugly and it's hard, but in adversity there is opportunity. You need to have a positive outlook and know that what you've been doing for clients in the past will work for clients in the future.
Sep 30, 2008 10:14 pm

Anon, I like the analogy with the Tuna. Give me 12 cans!

 
BondGuy, Great advice about when the times get tough, the tough get going. I think you have a great attitude for success and some good ideas to meet know people.
 
Thanks Gents
Sep 30, 2008 10:26 pm

Some great material here, that Bond Guy post is worth doing if you have the time to market.

 
Hey, I've been around a while, mainly fee based with C shares, so just calling clients and collecting a slightly reduced trail.
 
But in response to the "crisis", I'm going to eliminate all 12 b-1 fees. Just move the managed funds in the wrap accounts to ETFs, and raise fees for smaller accounts. I wonder if anyone else is taking advantage of tough times to reduce (some) fees for (some) clients. Overall, it should be about 1/2 of 1% for most clients.
 
Not trying to make a big deal about it, just trying to use adversity to get square with clients, and get them telling their friends. You can do this at a broker dealer, or of course RIA.
 
Definitely want to touch every client (phone) right now. The emotional connection with them right now is amazing, just checking in and saying, "Your money is safe, and I am thinking about you. Let's meet if you like."
Sep 30, 2008 10:28 pm

That is, a 1/2 of 1% reduction. The wrap fee goes from 1.75 down to .75 over 1m. Seems logical to "reduce" fees when it is harder to make money for all.

Sep 30, 2008 10:57 pm

If you normally have a level head and have been doing this for at least 3-4 years, and now you are having a hard time with the idea of putting your client's money to work, or maybe you're even losing a little sleep lately...that is a GOOD SIGN!

Why?  Simple.  If you're feeling that way, there are probably tens of thousands investors and advisors out there who are feeling even more freaked out than you, and they're acting it out by selling.  That means OPPORTUNITY...irrational pricing...so forth.

So now you just have to put aside the fear and act to seize the day.  Don't over think this.

Sep 30, 2008 11:15 pm

Great Post bond guy.  The owner of a football team does not fire a coach when he wins... he fires them, when they lose 7 games in a row and has no explanation for it.  Focus on what you can control.

I just followed up with 3 big prospects who were too busy to talk months ago and booked meetings with them next week.  This chaos in the market will make you big time, or it will be a big waste of your time and you need to go look for another J O B.
As for cold calling which i rarely do, i have done some this week and have got some meetings from it.  1- are you happy with the service you have gotten so far? 2-Are you comfortable(no one is comfortable) with the performance on your investments? 
3- Has your wealth mangement group lived up to your expectations especially in the light of this turmoil?   THank me after you get progress with those 3 bold questions. 
Good luck.
Oct 1, 2008 6:38 am

walking9, it's a terrible idea.  I'll let others rip into you for it.

Oct 1, 2008 12:12 pm

Sorry if my strategy, which is in play, is not clear.

 
You don't drop any wrap fees. You raise them on small accounts.
 
" Mr. client, we are using "C" shares. It has an overall Morningstar rating of one star. The expense ration is 2.14. We're moving your account (under 100k) to wrap at 1.5%. You'll be paying an expense ration of .25 on VT. That's a savings of .39 to you, and I get paid a little more to provide service and planning. Your average annual return, compounded over more than the past four years, has been about 4.5%. It is a tougher world, you could use some extra return. By eliminating the hidden fees and selling arrangements, you know exactly what you are paying. I would appreciate if you would mention to your friends that we are working on a fee-only basis (even at a broker dealer)."
 
500k plus client, " We're holding your wrap fee steady and dropping all of the 12b1s. You could use the extra return, and I appreciate your business. I take a little hit on income, but I get paid by growing your assets to a bigger amount. We're in this together.
 
(Stop using your big accounts to subsidize your little accounts, and get focused on every client, who is paying their fair share, and find another advisor for those who are not paying for your time.)
 
Please rip away.
Oct 1, 2008 12:14 pm

The C share example is OIVCX.

Oct 1, 2008 12:41 pm

Sorry, too dumb to find the edit function here. At the risk of pointing out the obvious, you also have meeting material with the year end tax planning aspects of a down market. Okay, ordinary gains offset is limited to 3k, but there are plenty of gains and losses, likely. You can still use managed funds at no load.