Why a Wirehouse

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Mar 25, 2008 10:32 pm

From reading the recent posts, IMO, people don't know which wirehouse they want to join for whatever reason. Fine.

People at wirehouses often "jump from one frying pan to another." Wirehouses can have all sorts of problems. Fine.

According to Ice's post, Indy's and regionals tend to pay better.
http://www.onwallstreet.com/global/payout-grids.html

Then why don't people fight to get into Indy firms, or small boutique B/Ds?

The only rational reason I can think of is that it's "easier" (I'm using this term loosely) to gather assets being at a wire.

"Hello, my name is 'John Smith' from Merrill Lynch, UBS, SB, etc." must sound better then...

"Hello, my name is 'John Smith' from Company A."

Is my logic flawed?

Mar 25, 2008 10:52 pm
Insideman:





Then why don't people fight to get into Indy firms,

 
How about not wanting to waste time on things like...
Payroll, taxes,insurance, paying rent, lights, buying paperclips, paper, copier, notepads, worker comp for staff, buying furniture, computers, worrying about having 100% of your own legal liability, basically all of the admin garbage you don't have to deal with at a firm.
Can a name firm help you bring in assets?  It can but the person behind the desk is the primary reason.  In my conversations with Indy reps in my area, most feel someone starting fresh Indy would have to be well capitalized and would not receive the training and support you get at a wire.  So that eliminates most from starting fresh Indy.  The vast majority (n/inc those who bought in to a book) of successful indy reps came from somewhere else and transferred what they could of their book.  Before everyone jumps down my throat with stories of 98% migration, avg migration for transitioning broker is <60% of production after THREE years.  Quick math 70% payout on 60% of book with all the headaches < 50% payout of 100%(assuming no growth) of book.
Mar 25, 2008 10:54 pm

BTW, not saying Indy is bad, just not for everyone and not without its unique flaws.

Mar 25, 2008 11:15 pm
Bluetang:
 
How about not wanting to waste time on things like...
Payroll, taxes,insurance, paying rent, lights, buying paperclips, paper, copier, notepads, worker comp for staff, buying furniture, computers, worrying about having 100% of your own legal liability, basically all of the admin garbage you don't have to deal with at a firm.



Didn't realize the list of expenses at an Indy could beso abundant. (Although I'm sure all are slightly different in their own way.)

How do you feel about the "Branding" of a ML or SB aiding in the gathering of assets? Especially fee-based.

Mar 25, 2008 11:53 pm
Insideman:
Bluetang:
 
How about not wanting to waste time on things like...
Payroll, taxes,insurance, paying rent, lights, buying paperclips, paper, copier, notepads, worker comp for staff, buying furniture, computers, worrying about having 100% of your own legal liability, basically all of the admin garbage you don't have to deal with at a firm.



Didn't realize the list of expenses at an Indy could beso abundant. (Although I'm sure all are slightly different in their own way.)

How do you feel about the "Branding" of a ML or SB aiding in the gathering of assets? Especially fee-based.

 
Blue is right on with all the misc. expenses being Indy.  I started at ML.  I found the "brand" of ML was basically indifferent to most people.  Sometimes people liked the name of ML, and other times, people HATED the name.  Again, I agree with Blue in that it is all about who is behind the desk.  Since being independent, I've had FAR more success selling the "objectivity" of being idependent as opposed to selling the ML brand.  Another thing I've noticed is that many people are clueless as to the differences from firm to firm. 
 
There are different types of independence by the way.  For instance, I work with about 10 other independents.  We share office space, which makes it cheaper.  We each pay $725/month, which includes office, phone, internet, parking, copier, electricity and all the other basics.  My payout is in the mid-80's, ticket charges are $30.  All the subscriptions to services add up (RT quotes, Morningstar, DNC Scrubber, Leads, letterhead, notepads, brochures, envelopes among many, many others).  It works for me.
 
All of the people I've talked to who are independent have said one thing, "I only wish I would've gone independent sooner". 
 
If someone likes being at a wirehouse, that's great.  Everyone has their own style.  My friends who are still at wirehouses like their lifestyle.  They like strolling in late morning and leaving early afternoon and not having to worry about any fees/expenses or business-owner type events.
Mar 26, 2008 6:19 am

Insideman, yes, your logic is flawed.

 
Do you know why most people at ML, SB, and UBS fail?   It's because the firm isn't what is going to make the person successful. 
 
There's plenty of advantages and reasons why one would want to work at a wirehouse.   The name recognition, however, makes a very tiny difference.
 
You won't hear about people fighting to get into "Anonymous Financial", for example, because other than my clients, nobody has heard of my firm.  Yet, if you take all of the little shops all over the country and look at them as a whole, there are tons of people fighting to get in.
 
Personally, I think that the reason that lots of new people fight to get into a wirehouse is name recognition, salary, and perceived prestige.   I have my own biases and feel that starting at a wirehouse for someone without being an established person (older with sales skills and/or a high net worth rolodex) is foolish. 
Mar 26, 2008 8:29 am

Sorry, I may have miss understood. So, being young and inexperienced an Indy firm would be better?

Mar 26, 2008 8:57 am

I don't think that anybody is saying that.  It all depends on the specifics.  We, or at least I, are just saying that the name of the firm is going to do very little to help you succeed.

Mar 26, 2008 8:58 am

One of the other factors is that in many areas, wirehouses have very significant coverage.  For example, in my area, ML has a couple of very large employer 401K plans.  They also manage the stock options, ESOP's, and deferred stock for the employer.  They sort of have the market on many of those employees, by default.  In fact, many of those employees are my clients, and many of them originally were with ML because it was just "easier". 

 
One other factor is that the prestigious wires have a reputation (deservedly so) for having more sophisticated services and capabilities.  So most HNW and UHNW people are going to end up at a wire or investment bank, because they just don't feel comfortable putting all their worth with Jimmy Jones's Investment Services, the one-man-band behind the shopping plaza.  Now, it is very different when you are talking about large, well-established independant firms.  But those are two different worlds.
Mar 26, 2008 9:10 am

When I say indy, I mean a small established firm that brokers employee benefits. With securities on the side.

Mar 26, 2008 9:10 am

Might come down to something as simple as knowing if I walk into a ML or wherever there will be a branch manager who I can talk to about a job.  Doesn't matter if I know them from Adam, I know someone in the office space is in charge or recruiting and hiring.  The local independent firm is a great unknown to most.  Who owns it, do they need newbs, etc etc.  We as a species tend to seek the easiest way of doing things.

Mar 26, 2008 10:52 am

I'm definitely confused, which is all in good effort. The earliest I'd enter this field as an advisor would be in 3-4 years. I'm just an assistant while I finish college.

Mar 26, 2008 10:57 am
Insideman:

I'm definitely confused, which is all in good effort. The earliest I'd enter this field as an advisor would be in 3-4 years. I'm just an assistant while I finish college.

 
Stay in college...for as long as you can.  For the girls, parties, or whatever, just stay in college.
Mar 26, 2008 7:29 pm
anonymous:
 There's plenty of advantages and reasons why one would want to work at a wirehouse.   The name recognition, however, makes a very tiny difference.  



Anonymous, or anyone, could you elaborate on those advantages in relation to someone just starting out.

I understand that a wirehouse has some sex appeal to it, but beyond that. Discounting the fact that you don't have to deal with the small business tasks (rent, papers, pens, copies, software, all the aforementioned)

Mar 26, 2008 7:48 pm

Advantages

1)  Wire is going to invest a lot of money in you with training lasting anywhere from 4 months to 2 years.  It is in the firms best interest to see you make it.
2)  Some sort of salary (varies greatly from firm to firm and area to area) to support you while you build your business.
3)  Support, you can concentrate on production and not have to worry about admin tasks.
4)  Opportunity ,as other brokers fail, leave the firm, or retire, often you can pickup accounts, sometimes for free, or if a broker retires you may be able to buy them out.
5)  Benefits (medical, dental...) more important to some than others.
 
This is an extremely tough business to make it in, and by make it, I mean get to your 5th anniversary.  To make it, you need as little distraction as possible and to spend ALL your time on the only thing that matters, production.  A wire not only will allow you to do this, they insist on it.  Once you are established and have relationships with clients, then the world is your oyster.  You can go Indy and increase your pay, you can go to a competitor and bank a big check for moving, or you stay where your at and make a lot of money for work that is not that hard.  Not perfect in every way, but a lot of advantages.
Mar 26, 2008 8:32 pm

I would not say your logic is flawed, just uninformed. Most indys will not take on trainees. That's not to say you couldn't find one that would. Just that most won't.

 
Most of us started at either wires or regionals with training programs, sales suppot, and a salary for a year or two. Once well on our way many of reach a fork, or decision point: to get tothe next level or to the final level, what is best path to reach that goal. Each of us finds a different answer to that question. Going indy is one of those answers. For others, it a bank, and for others its staying put.
 
 
Mar 26, 2008 9:52 pm

I'm trying to take a good look at the world I may be entering in the near future.

I'd like to try and make the least amount of mistakes, especially if the mistake is the field it self.

Thanks for the information.

Mar 26, 2008 10:50 pm
Insideman:

I'm trying to take a good look at the world I may be entering in the near future.

I'd like to try and make the least amount of mistakes, especially if the mistake is the field it self.

Thanks for the information.

 
If you do a search on this topic from past threads, you would find that there has been a lot of advice given to kids just out of college to start in a sales related career outside of this industry.  You will learn how to sell, build up your network of people, and get a little "real world" experience before being under the gun at a financial firm.  Just some food for thought...