How many of you manage your clients portfolios?

or Register to post new content in the forum

26 RepliesJump to last post

 

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Jun 30, 2008 11:41 pm

Don't bash me for the newbie questions, but I wanted to learn how to create own portfolios and pick stocks. (I'm not an advisor, but I'm in the financial services sales industry where I use mutual funds and third party money managers).


What is the best way for me to learn? Any books? Computer software technology? Best way to learn how to run Monte Carlo simulations? Thanks!

Jul 1, 2008 1:14 am

The only way a FIRM would even consider allowing you to "pick stocks" would be to get the CFA designation.

 
It's the be-all-and-end-all, "Mack-Daddy" of all investment designations.
 
Have fun studying!  It'll take you a minimum of 3 years to complete.
Jul 1, 2008 8:37 am
JimYoung:

Don't bash me for the newbie questions, but I wanted to learn how to create own portfolios and pick stocks. (I'm not an advisor, but I'm in the financial services sales industry where I use mutual funds and third party money managers).


What is the best way for me to learn? Any books? Computer software technology? Best way to learn how to run Monte Carlo simulations? Thanks!


What is it you are hoping to accomplish by creating your own portfolios and stock picks?  There is a world of difference between picking funds and third party money managers and essentially becoming a portfolio manager.  It's similar to the difference between a GP and a cardiologist: one is a generalist, the other a specialist in a narrow area. 

If you truly want to be paid for managing portfolios on a discretionary basis (as opposed to pitching stock picks), you obviously need to approach this as you would pretty much any professional endeavor: first LEARN, then do. 

What's the best way to learn?  While it can certainly involve schools and designations (such as the CFA), nothing beats actually working for those who have the experience and are willing to train you.  And you're not likely to find many opportunities for that in your current sales environment, where compliance concerns will (as Skippy alludes to) make that very difficult if not impossible.  If you want to catch salmon, fish where the salmon swim, and as it pertains to portfolio managers, you need to focus on asset management RIAs.

Computer software may easily spit out Monte Carlos and even suggested stock picks, but you can't simply rely on technology to compensate for a lack of knowledge and experience.  Those are tools, and like any tools the results you get are more a function of the person using the tools than the tools themselves.

There is no magic short cut to gaining knowledge and experience in any field.  Find someone who is good at what you want to do and learn from them.  But first be certain that is really what you want to do professionally, because you can't expect to be a decent portfolio manager without dedicating yourself to it.

Jul 1, 2008 10:55 am
skippy:

The only way a FIRM would even consider allowing you to "pick stocks" would be to get the CFA designation.

 
It's the be-all-and-end-all, "Mack-Daddy" of all investment designations.
 
Have fun studying!  It'll take you a minimum of 3 years to complete.



Are you saying that in your firm, if a client comes to you with a fist full of cash or transfers and existing portfolio over to you and is interested in buying some individual stocks, your firm will not let you do this?   Seriously?

Send them on over to me please. 

Jul 1, 2008 11:06 am
babbling looney:
skippy:

The only way a FIRM would even consider allowing you to "pick stocks" would be to get the CFA designation.

 
It's the be-all-and-end-all, "Mack-Daddy" of all investment designations.
 
Have fun studying!  It'll take you a minimum of 3 years to complete.



Are you saying that in your firm, if a client comes to you with a fist full of cash or transfers and existing portfolio over to you and is interested in buying some individual stocks, your firm will not let you do this?   Seriously?

Send them on over to me please. 

 
If a client came to me with an ACAT of a bunch of stocks, I can take it.
 
If the client wants to buy some stocks, I can take their trade orders on an UNSOLICITED basis.
 
I can recommend liquidating stocks for the purposes of furthering their financial plan, or diversification purposes to put the proceeds into a mutual fund or other well-diversified investment product.  I cannot SOLICIT a sell for any other reason.
 
For being on that basis, I'd still be charging "full service" charges.  Yet, the client doesn't benefit from any firm research or professional advice regarding their individual stock holdings.
 
This is the way most B/Ds operate that don't have their own firm research department.
 
I'm okay with it because I consider myself a "financial strategist" or "Macro-Manager" for my clients.  I'm not someone to watch the market every second and manage portfolios myself.  I can't do it and I don't want to do it.  I'll let mutual fund and 3rd party managers do their job while I manage the client.
Jul 2, 2008 9:48 am

Skippy,

I'm not sure your B/D's restrictions on stock transactions is representative of the norm.  That sounds very restrictive to me.  Perhaps that is more typical of the insurance or bank B/Ds, but I can't speak with any first hand experience about those.

My experience at a wirehouse was you could pitch stock transactions all day long, but they are very reluctant to allow anyone to operate discretionary accounts - you must be closely vetted for that, and I'm sure a CFA or similar experience would be key, as would production (you always had more clout the higher your production).  But I think even those few discretionary accounts were impacted and largely weeded out following last year's vacating of the SEC B/D exemption rule. 

I agree with you that it is not my goal to try and be a portfolio manager, but to be that restricted is overkill IMO - just another example of the compliance tail wagging the dog and managing for the lowest common denominator.

Aug 1, 2008 10:49 am
Morphius:
JimYoung:

Don't bash me for the newbie questions, but I wanted to learn how to create own portfolios and pick stocks. (I'm not an advisor, but I'm in the financial services sales industry where I use mutual funds and third party money managers).


What is the best way for me to learn? Any books? Computer software technology? Best way to learn how to run Monte Carlo simulations? Thanks!


What is it you are hoping to accomplish by creating your own portfolios and stock picks?  There is a world of difference between picking funds and third party money managers and essentially becoming a portfolio manager.  It's similar to the difference between a GP and a cardiologist: one is a generalist, the other a specialist in a narrow area. 

If you truly want to be paid for managing portfolios on a discretionary basis (as opposed to pitching stock picks), you obviously need to approach this as you would pretty much any professional endeavor: first LEARN, then do. 

What's the best way to learn?  While it can certainly involve schools and designations (such as the CFA), nothing beats actually working for those who have the experience and are willing to train you.  And you're not likely to find many opportunities for that in your current sales environment, where compliance concerns will (as Skippy alludes to) make that very difficult if not impossible.  If you want to catch salmon, fish where the salmon swim, and as it pertains to portfolio managers, you need to focus on asset management RIAs.

Computer software may easily spit out Monte Carlos and even suggested stock picks, but you can't simply rely on technology to compensate for a lack of knowledge and experience.  Those are tools, and like any tools the results you get are more a function of the person using the tools than the tools themselves.

There is no magic short cut to gaining knowledge and experience in any field.  Find someone who is good at what you want to do and learn from them.  But first be certain that is really what you want to do professionally, because you can't expect to be a decent portfolio manager without dedicating yourself to it.

 
What computer software program would you recommend? (preferably something easy to use as I am just starting out). The objective in trying to learn how to create portfolios myself is that when clients ask me why they would need me instead of just buying a mutual fund, I have an answer with substance other than "you need me for the hand-holding." Furthermore, if asked for my opinion of the market or which stocks are hot right now, I would like to be able to carry the conversation further.
Aug 1, 2008 11:40 am
Morphius:

Skippy,

I'm not sure your B/D's restrictions on stock transactions is representative of the norm.  That sounds very restrictive to me.  Perhaps that is more typical of the insurance or bank B/Ds, but I can't speak with any first hand experience about those.

My experience at a wirehouse was you could pitch stock transactions all day long, but they are very reluctant to allow anyone to operate discretionary accounts - you must be closely vetted for that, and I'm sure a CFA or similar experience would be key, as would production (you always had more clout the higher your production).  But I think even those few discretionary accounts were impacted and largely weeded out following last year's vacating of the SEC B/D exemption rule. 

I agree with you that it is not my goal to try and be a portfolio manager, but to be that restricted is overkill IMO - just another example of the compliance tail wagging the dog and managing for the lowest common denominator.

 
I know a couple S7 bank brokers that cannot solicit, but can accept trades.  It is abscially because they do not have analyst departments or receive any type of direction on individual stocks.  They can solicit funds and bonds (I think).
Aug 1, 2008 1:31 pm
JimYoung:

What computer software program would you recommend? (preferably something easy to use as I am just starting out). The objective in trying to learn how to create portfolios myself is that when clients ask me why they would need me instead of just buying a mutual fund, I have an answer with substance other than "you need me for the hand-holding." Furthermore, if asked for my opinion of the market or which stocks are hot right now, I would like to be able to carry the conversation further.


I think if you re-read my post that mentioned software you will realize I do not recommend any software for the purpose you mention, i.e "trying to learn how to create portfolios myself." 

Moreover, the software readily available is designed more for the asset class level, NOT for picking individual securities, much less "which stocks are hot right now."  I can promise you this: pretty much any trading "software" or "system" offered for sale is not worth diddly - if it truly worked the developers would make far more money using it to trade than selling it. 

Most importantly, I would never recommend someone "learning" with clients' money, and the software available does not negate the need to learn first.  It is a tool that can be used once you have some idea of how to build portfolios.  There is no software short cut to knowledge or competence. 

Jim, doesn't your b/d offer you any help in recommending portfolios, especially containing funds?

Aug 2, 2008 12:20 pm
Morphius:
JimYoung:

What computer software program would you recommend? (preferably something easy to use as I am just starting out). The objective in trying to learn how to create portfolios myself is that when clients ask me why they would need me instead of just buying a mutual fund, I have an answer with substance other than "you need me for the hand-holding." Furthermore, if asked for my opinion of the market or which stocks are hot right now, I would like to be able to carry the conversation further.


I think if you re-read my post that mentioned software you will realize I do not recommend any software for the purpose you mention, i.e "trying to learn how to create portfolios myself." 

Moreover, the software readily available is designed more for the asset class level, NOT for picking individual securities, much less "which stocks are hot right now."  I can promise you this: pretty much any trading "software" or "system" offered for sale is not worth diddly - if it truly worked the developers would make far more money using it to trade than selling it. 

Most importantly, I would never recommend someone "learning" with clients' money, and the software available does not negate the need to learn first.  It is a tool that can be used once you have some idea of how to build portfolios.  There is no software short cut to knowledge or competence. 

Jim, doesn't your b/d offer you any help in recommending portfolios, especially containing funds?

 
I'm not yet a registered rep yet, but I am in the financial services sector of the industry. I should be diving in within 6 months-1 year, but it can't hurt learning as much as I can for the time being right? Since there's not any way I can experience this "hands-on" right now, what do you recommend?
Aug 25, 2008 11:57 pm

Start with a Benjamin Graham book or two. The Intelligent Investor and Security Analysis.


Oct 23, 2008 8:17 pm

Strange ...

I started with AGE a little over a year ago and could buy and sell stocks from day one. A CFA? yeah sure. That's the quickest way to starve out I've heard yet.
Nov 5, 2008 12:17 am

Jim,

 
You have some hard work cut out in front for you but with desire you can make it.
 
I recceommend readinga couple of books,,,,anything from Nick Murray.  Read it from cover to cover and practice that stuff in front of a mirror.
 
Learn to use some type of screening software and set up a screen of what you want t company to have for example, zero long term debt while growing the earnings etc.  Play with that for a while and you will improve.
 
While you are learning this learn a good mutual fund story like Franklin Founding fund Strategy.
 
This will get you on your way.
Nov 23, 2008 9:32 am

As for picking stocks use your companies focus list, use the non producing CFA's work. That's their job. With AGE I primarily use the DSIP list, a dividend strategy. When I get an email saying one is falling off the list like ACAS I'll start writting 10%in the money calls and put in a stop in case it begins to really tank, to get rid of it. When one makes the list I'll sell a put out at 3 standard deviations, less than 45 days (time value degredation is your friend) and wait to see if we get it or not, if not write another put until we do.

Nov 27, 2008 1:51 pm

All you need to manage your own clients' portfolios is a Series 65 or 66, with whatever additional training your firm assigns you.

I manage about $20 million in portfolio management programs where I select the securities myself on an unsolicited basis.  In September I went to 80% cash--too late, unfortunately--but my accounts are down 21% on the year as opposed to down half.  In markets like this, I'm hard put to think of a reason why a client would be best served by throwing money into mutual funds, and hoping the managers there do the right thing.  Lot to be said for being able to press a button, and have all your clients out of stocks, or into them, in a matter of seconds.

Nov 28, 2008 11:07 am

Good luck predicting the market over the next 20 years for your clients(Seeing as you already failed this year).

 
 
Nov 29, 2008 9:08 am
Bodysurf:

All you need to manage your own clients' portfolios is a Series 65 or 66, with whatever additional training your firm assigns you.I manage about $20 million in portfolio management programs where I select the securities myself on an unsolicited basis. In September I went to 80% cash--too late, unfortunately--but my accounts are down 21% on the year as opposed to down half. In markets like this, I'm hard put to think of a reason why a client would be best served by throwing money into mutual funds, and hoping the managers there do the right thing. Lot to be said for being able to press a button, and have all your clients out of stocks, or into them, in a matter of seconds.





This is where many FA's get REALLY confused. Most don't realize that fund managers may not LEGALLY be able to go to all cash, bonds, gold, whatever. Their prospectus may dictate they be 80% invested(or more or less), and invested within narrow parameters (i.e. small cap growth, or the stock must come from within a particular index, etc.). So when the shlt hits the fan, there's not much they can do. HOWEVER, this is where it's the FA's job to know when to reduce mutual fund holdings and go to cash in the overall portfolio. You CANNOT expect most fund managers to weather a storm against their fund prospectus objectives, since many are handcuffed by law.



This is why I like certain core funds such as global allocation funds (First Eagle Global, Blackrock, etc.). They have much more lattitude than many narrowly-focused funds.

Nov 29, 2008 2:36 pm

Founding Fund Strategy is terrible.. 3 funds available individually, then packaged together for a higher fee.  Not to mention 2 of the funds are poor and the third one can't be categorized because it has everything...

Dec 2, 2008 1:05 am

As far as stockpicking goes I agree with the other guys regarding the various books, I would also recommend using some sort of stock newsletter to get some ideas and make them your own. I have used www.stocksatbottom.com since 2004 and have had some good success  depending on my clients goals, suitability ,etc.

Dec 11, 2008 5:56 pm

Again, does your firm not have some kind of focus list that they let you know when to buy hold and sell and why? That will be you best place to start. If you can get your head around buying yield and selling volitility using options you can really make things happen for your clients.