I’m guessing that this is a common scenario given the bear market we just exited.  My assets are up a bunch, but my gross is actually slighty lower.  My business is very fee and trail-oriented (almost 70%) and thus, production often lags AUM.  The problem is amplified in an up market since my fees and trails from earlier this year were based on lower balances.  In addition, clients and prospects are still pretty gun-shy and unwilling to put new money to work given (1) recent history (2) stock market volatility and (3) low interest rates.

  That being said, I just booked close to a record gross month and I will likely have my best year ever in 2010, so don't be surprised when your revenues start catching up with your AUM growth.

[quote=Indyone] I’m guessing that this is a common scenario given the bear market we just exited. My assets are up a bunch, but my gross is actually slighty lower. My business is very fee and trail-oriented (almost 70%) and thus, production often lags AUM. The problem is amplified in an up market since my fees and trails from earlier this year were based on lower balances. In addition, clients and prospects are still pretty gun-shy and unwilling to put new money to work given (1) recent history (2) stock market volatility and (3) low interest rates.

That being said, I just booked close to a record gross month and I will likely have my best year ever in 2010, so don’t be surprised when your revenues start catching up with your AUM growth.[/quote]



My business is similar, mostly fee… How were you able to book a record month, have you switched to non-fee or just bring in more assets?

Down and Down.  :(  But to my admission, I've been quite a lazy self pittying cry baby most the year up until recently. 

But next year, they will be Up and Up. 

How about protection of principal with interest rates rising…Ice…You could have figured that out afterall you have an MBA in finance…

  A strategy that I used with a sizable client was to find a SMA who specializes in protecting values during periods where interest rates are or about to rise. Since they really have no where to go but up, Bondguy should be selling out to retain principal or even make a few bucks (which I am sure he is today). The SMA manager is RNC Genter, I am sure there are a others, Gannet Welsh and Kotler comes to mind, and during the period five years ago or so when we had 17 rate increases in 18 months the client had an overall return that was better than 5%.   The reason I remember this was the first position they bought was 150K US Treasury at 7.5% at 127. I thought the client was gonna have a coronary when he paid 190K for the 150k piece. Their strategy was to buy premium bonds and then trade them when strike points were hit. I can't argue with the results, but it wasn't easy to keep the client satisfied. I spent alot of time hand holding.   So Bondguy was right last year and he would be wise to take the profits and perhaps (god forbid) enter the market...because it looks pretty darn good for the next few years. Kind of reminds me of 1994. Ice, were you out of college yet?

[quote=BigCheese]How about protection of principal with interest rates rising…Ice…You could have figured that out afterall you have an MBA in finance…

  A strategy that I used with a sizable client was to find a SMA who specializes in protecting values during periods where interest rates are or about to rise. Since they really have no where to go but up, Bondguy should be selling out to retain principal or even make a few bucks (which I am sure he is today). The SMA manager is RNC Genter, I am sure there are a others, Gannet Welsh and Kotler comes to mind, and during the period five years ago or so when we had 17 rate increases in 18 months the client had an overall return that was better than 5%.   The reason I remember this was the first position they bought was 150K US Treasury at 7.5% at 127. I thought the client was gonna have a coronary when he paid 190K for the 150k piece. Their strategy was to buy premium bonds and then trade them when strike points were hit. I can't argue with the results, but it wasn't easy to keep the client satisfied. I spent alot of time hand holding.   So Bondguy was right last year and he would be wise to take the profits and perhaps (god forbid) enter the market...because it looks pretty darn good for the next few years. Kind of reminds me of 1994. Ice, were you out of college yet? [/quote]   Again, ALL  of my bond clients are in it for the income. We are selling positions only when the profit and the replacement income add up to a higher number than sitting on the bonds. Kinda like selling out of a pre-re at a premium. There is no grand strategy. There is no trying to beat the market. Like i said-simple.   Go back to the early eighties when inflation shot rates straight up. The market gurus went on and on about how long term bond holders were getting crushed. They were talking about traders because long term buy and hold for the income types were getting exactly what they signed up for; a coupon payment once every six months.  And with rates moving up they didn't have to worry about an early call on the bonds. This made for easy income planning and a check they could count on. And, back in those days we're talking 7% tax free in a 50% tax rate world. On an equivalent yield basis, these clients were doing as well as treasury buyers at 14%.  For those with cash to spend we bought into the higher rates. And eventually all the bonds either matured at par or were called at, at least par if not a premium. Noone got crushed. All clients got everything that was promised to them even though the interest rate world as we knew it went beserk.   No need to buy any insurance/hedge/strategy. It's really simple: "This is how it works Mr. Client-when interest rates go up the value of your bonds go down. When interest rates go down the value of your bonds go up. Both will happen during your holding period. When and how much I can't tell you. Then again, neither can anyone else. This I can tell you. If you hold the bonds to maturity, you'll get every dime of your money back. That's because  a bond is a promissory note. It's a promise to pay. And, on that maturity date they will pay regardless of whether interest rates are up or down. Meantime, once every six months, until that happens, they'll send you a check. That's your tax free income. How does that sound to you?"   Bottom line- we don't worry about the market.    

[quote=BondGuy][quote=BigCheese]How about protection of principal with interest rates rising…Ice…You could have figured that out afterall you have an MBA in finance…

  A strategy that I used with a sizable client was to find a SMA who specializes in protecting values during periods where interest rates are or about to rise. Since they really have no where to go but up, Bondguy should be selling out to retain principal or even make a few bucks (which I am sure he is today). The SMA manager is RNC Genter, I am sure there are a others, Gannet Welsh and Kotler comes to mind, and during the period five years ago or so when we had 17 rate increases in 18 months the client had an overall return that was better than 5%.   The reason I remember this was the first position they bought was 150K US Treasury at 7.5% at 127. I thought the client was gonna have a coronary when he paid 190K for the 150k piece. Their strategy was to buy premium bonds and then trade them when strike points were hit. I can't argue with the results, but it wasn't easy to keep the client satisfied. I spent alot of time hand holding.   So Bondguy was right last year and he would be wise to take the profits and perhaps (god forbid) enter the market...because it looks pretty darn good for the next few years. Kind of reminds me of 1994. Ice, were you out of college yet? [/quote]   Again, ALL  of my bond clients are in it for the income. We are selling positions only when the profit and the replacement income add up to a higher number than sitting on the bonds. Kinda like selling out of a pre-re at a premium. There is no grand strategy. There is no trying to beat the market. Like i said-simple.   Go back to the early eighties when inflation shot rates straight up. The market gurus went on and on about how long term bond holders were getting crushed. They were talking about traders because long term buy and hold for the income types were getting exactly what they signed up for; a coupon payment once every six months.  And with rates moving up they didn't have to worry about an early call on the bonds. This made for easy income planning and a check they could count on. And, back in those days we're talking 7% tax free in a 50% tax rate world. On an equivalent yield basis, these clients were doing as well as treasury buyers at 14%.  For those with cash to spend we bought into the higher rates. And eventually all the bonds either matured at par or were called at, at least par if not a premium. Noone got crushed. All clients got everything that was promised to them even though the interest rate world as we knew it went beserk.   No need to buy any insurance/hedge/strategy. It's really simple: "This is how it works Mr. Client-when interest rates go up the value of your bonds go down. When interest rates go down the value of your bonds go up. Both will happen during your holding period. When and how much I can't tell you. Then again, neither can anyone else. This I can tell you. If you hold the bonds to maturity, you'll get every dime of your money back. That's because  a bond is a promissory note. It's a promise to pay. And, on that maturity date they will pay regardless of whether interest rates are up or down. Meantime, once every six months, until that happens, they'll send you a check. That's your tax free income. How does that sound to you?"   Bottom line- we don't worry about the market.    [/quote]   DAMN!...It makes me want to start a bond business.  Nice post!  I have similar conversations with my Bond clients, although it is only a small part of my business.  I have recently been selling some of my longer positions for nice profits and replacing them with shorter term, higher interest, better quality issues.  It didn't last that long, but was very easy to do for a while there!