Is the business dying?

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Nov 18, 2006 10:55 pm

I don't know about anyone else but it is my perception that the retail securites business is dying.  The consolidation of firms is well underway.  I predict that in 3-5 years we will have 4-5 major wirehouses and no regionals left.  These mega firms will only accept FA's doing 500,000+.  "Laggards" will be forced out via dramatic payout reductions and their assets will be funneled to the chosen few.  Towns that have 25-40 man wirehouse offices will see that number decline to 10-15 with no reduction in asset base.  Small clients (clients with less than $250,000 in assets) will be sent to "call centers" manned by registered clerks.  Those who are  living on managed money/ wrap fee accts, won't be safe either.  The squeeze has already begun on those fees.  Charging a client more than 1-1.5% will be impossible and by the time the independent manager and the firm get their cuts there will be little left for the broker.  Independents will be the only way to go but even those firms will cut payouts and raise standards.  The future looks bleak!

Nov 19, 2006 12:42 am

Gee thanks for stopping by Put Trader/Nasdy Newbie!   I almost didn't recognize you!

Nov 19, 2006 9:33 am

oh yea the future looks bleak. every year i make more money working less hours. this is a terrible business!

Nov 19, 2006 9:35 am

I am indy already, doesn't affect me.  My future doesn't look bleak.


Quite the opposite in fact.

Nov 19, 2006 10:07 am

$$$$$

As a rookie thats what I want to hear, nice response.

Nov 19, 2006 1:01 pm

Don't worry, there will always be a place for small-time brokers serving small-time clients.  Personally, I'd rather be one of the "chosen few" in the wirehouse.

Nov 19, 2006 8:31 pm
HankG:

I don't know about anyone else but it is my perception that the retail securites business is dying. The consolidation of firms is well underway. I predict that in 3-5 years we will have 4-5 major wirehouses and no regionals left. These mega firms will only accept FA's doing 500,000+. "Laggards" will be forced out via dramatic payout reductions and their assets will be funneled to the chosen few. Towns that have 25-40 man wirehouse offices will see that number decline to 10-15 with no reduction in asset base. Small clients (clients with less than $250,000 in assets) will be sent to "call centers" manned by registered clerks. Those who are living on managed money/ wrap fee accts, won't be safe either. The squeeze has already begun on those fees. Charging a client more than 1-1.5% will be impossible and by the time the independent manager and the firm get their cuts there will be little left for the broker. Independents will be the only way to go but even those firms will cut payouts and raise standards. The future looks bleak!





Everyone is entitled to their opinion, but I strongly disagree with every bit of what you wrote.

Nov 19, 2006 9:55 pm

What is this guy talking about?  Sooooo, none of the baby boomers trying to retire in the next 10 years are going to need any help?  Hmmmm, maybe I'm just THAT good that I am the only one getting flocks of these people coming to me for help all the time.  I guess everyone else in the industry is scraping for a few Roth and 529 accounts.  Gee, must just be me.  Everyone OTHER than my clients must be opening accounts at Vanguard and Indexing their way to retirement.

Nov 23, 2006 3:12 pm

The business is not dying. Its changing. Change with it, or you will die.


Yes, the big will get bigger and the small will be eliminated. At the wirehouses. The smaller guys will still have opportunities - at the Schwabs of the world, or indies.


JMHO

Nov 23, 2006 5:14 pm
Lex123:

Don't worry, there will always be a place for small-time

brokers serving small-time clients. Personally, I'd rather be one of the

"chosen few" in the wirehouse.





ROFLMAO...."Chosen" for what?

Nov 24, 2006 12:00 am
Starka:
Lex123:

Don't worry, there will always be a place for small-time

brokers serving small-time clients.  Personally, I'd rather be one of the

"chosen few" in the wirehouse.





ROFLMAO...."Chosen" for what?



Chosen to be a drone in a suit.
Chosen to have inferior product foisted upon him by investment bankers.
Chosen to have his BOM hassle him every single year for unrealistic increases in production, ethical compromises be damned.
Chosen to be stuck, with less chance of getting out the more clever the wirehouse lawyers get.
Chosen to have client who affiliate with his EMPLOYERS brand name, not his.
Chosen to deal with overly paranoid wirehouse compliance staff.

Yep....he's one of the 'chosen ones'.  I feel bad for the day he wakes up and realizes his dream is a nightmare...that is if he ever figures it out.

Nov 24, 2006 1:09 am

Rose colored glasses must be common equipment in your cases.  Buying and selling stocks for retial customers is unqestionably dead.  Transactions have become commoditized and can be done for $8 to $12 anywhere,  A firm/ broker who charges full rates is robbing the customer!  Sophisticated customers know the numbers,  They"re not going to pay you $400 to buy 500 shares of GE.  Each product will become more and more transparent to the buyer and costs (commissions) will have to be squezzed.  In five years this end of the industry will be made up of huge whirebrokers with 100"s of million dollars in assests and registered clerks who will deal with the little guys (<250,000) and other customer service issues using 800#'s..These clerks will get a reasonable salary and a chance to build business in a number of wasys to earn extra (subjective) bonuses.

Nov 24, 2006 2:28 am
HankG:

Rose colored glasses must be common equipment in your cases.  Buying and selling stocks for retial customers is unqestionably dead.  Transactions have become commoditized and can be done for $8 to $12 anywhere,  A firm/ broker who charges full rates is robbing the customer!  Sophisticated customers know the numbers,  They"re not going to pay you $400 to buy 500 shares of GE.  Each product will become more and more transparent to the buyer and costs (commissions) will have to be squezzed.  In five years this end of the industry will be made up of huge whirebrokers with 100"s of million dollars in assests and registered clerks who will deal with the little guys (<250,000) and other customer service issues using 800#'s..These clerks will get a reasonable salary and a chance to build business in a number of wasys to earn extra (subjective) bonuses.



Hank-

You can't spell worth a sh*te, and your story is oooohhhh so tired and old.....

So tell us why any of you should give you even a New York minute?

Nov 24, 2006 12:12 pm

Transactions may be commoditized, but advice sure the hell isn't.  I have new clients coming to me all of the time and they want advice...not a website.  I've gone indy and went from zero to $30 million AUM in 17 months.  My plan is to level out (and grow gradually) at $50-60 million by the five year mark and I'll make more than enough to sustain me.  It wouldn't surprise me at all if I hit the $50-60 million mark well before then, but I'm not putting any pressure on myself to do so.


Your failure hasn't translated to mine.

Nov 24, 2006 1:44 pm
Indyone:

Transactions may be commoditized, but advice sure the hell isn't.  I have new clients coming to me all of the time and they want advice...not a website.  I've gone indy and went from zero to $30 million AUM in 17 months.  My plan is to level out (and grow gradually) at $50-60 million by the five year mark and I'll make more than enough to sustain me.  It wouldn't surprise me at all if I hit the $50-60 million mark well before then, but I'm not putting any pressure on myself to do so.


Your failure hasn't translated to mine.



The way you're talking it sounds like you'll have $50-60 million by Christmas.

Nov 24, 2006 2:19 pm
HankG:

Rose colored glasses must be common equipment in

your cases. Buying and selling stocks for retial customers is

unqestionably dead. Transactions have become commoditized and can

be done for $8 to $12 anywhere, A firm/ broker who charges full rates is

robbing the customer! Sophisticated customers know the numbers,

They"re not going to pay you $400 to buy 500 shares of GE. Each

product will become more and more transparent to the buyer and costs

(commissions) will have to be squezzed. In five years this end of the

industry will be made up of huge whirebrokers with 100"s of million

dollars in assests and registered clerks who will deal with the little guys

(<250,000) and other customer service issues using 800#'s..These clerks

will get a reasonable salary and a chance to build business in a number of

wasys to earn extra (subjective) bonuses.





It might be unquestionably dead for you, but I have a number of clients

with significant portfolios that don't seem to have a problem paying me

for stock buying advice. Of course, if your book is made up largely of day

traders, it might be dead for you...

Nov 24, 2006 4:00 pm
My Inner Child:
Indyone:

Transactions may be commoditized, but advice sure the hell isn't.  I have new clients coming to me all of the time and they want advice...not a website.  I've gone indy and went from zero to $30 million AUM in 17 months.  My plan is to level out (and grow gradually) at $50-60 million by the five year mark and I'll make more than enough to sustain me.  It wouldn't surprise me at all if I hit the $50-60 million mark well before then, but I'm not putting any pressure on myself to do so.

Your failure hasn't translated to mine.


The way you're talking it sounds like you'll have $50-60 million by Christmas.


I'm just one lottery winner away from it...

Nov 25, 2006 1:00 am

Here's a scary thought:  The people who retired a decade or two ago were savers who lived through the great depression.  The people who are starting to retire are baby boomers who have no desire to leave a legacy.  While there will certainly be room for advisors who can teach clients how to spend all their money, I believe there will be fewer assets to manage.  I think there will definitely be a squeeze in my industry.


By the way, Indyone, what are you doing to gather assets?  Seminars, networking, cold calling/walking, or something else?


Ace

Nov 25, 2006 12:39 pm

Squeeze?



People have no more pensions. They are forced to plan and save for their own retirement this puts us in the driver's seat. I see young people with 50 or 100K that will make excellent clients in 5-10 years sure some want to do it themselves and some want help how is that different than right now?



Here is another example turbotax came out and you can do your taxes for $30, but you still see a lineup at tax advisors in April.



The margins will likely be squeezed, but I believe the volume will make up for the shortfall

Nov 25, 2006 10:00 pm
Ace Planner:

Here's a scary thought:  The people who retired a decade or two ago were savers who lived through the great depression.  The people who are starting to retire are baby boomers who have no desire to leave a legacy.  While there will certainly be room for advisors who can teach clients how to spend all their money, I believe there will be fewer assets to manage.  I think there will definitely be a squeeze in my industry.

By the way, Indyone, what are you doing to gather assets?  Seminars, networking, cold calling/walking, or something else?


Ace


At this stage in my career, my new assets are almost all referrals...mostly client referrals, with some professional (CPA/Attorney) referrals in about a 4:1 ratio.  I did my share of seminars in the early stages of my career, but even then, I was heavily referral based.  The difference was that most of my referrals in the beginning were from bank employees and were mostly low quality.  Thankfully, there were a lot of referrals so I could focus on the better ones and still stay busy.  I never cold-called or cold-walked.  I'm not knocking it...I just knew it wasn't my style so I started in a bank program where it wasn't necessary.


As far as a squeeze goes, I still see a lot of savers here in the Midwest, and better yet, these savers are starting to inherit their parents' wealth, so while I've met some spenders, I don't let 'em spend too much time in my office.  Once profiled as a spender, I give them two options...be willing to dramatically alter their habits or find another advisor.  I choose not to be an enabler.