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Feb 5, 2008 9:06 am

I know that most of you would consider this going from one evil to another, but here is my situation and I am hoping to get some constructive feedback.  I have been with Edward Jones for about 2 1/2 years.  I live in a small town and I appreciate being able to work in this industry without having to move my family to a larger city, so Edward Jones works well for me.  I am a "new new" with Jones so obviously I had no assets or clients given to me.  I have done well enough to make it this far but (10 Mill AUM, 175 Households)   I realize I am far from being well established in this business.  I am not really unhappy with Jones, besides watching new people being given huge offices for no apparent good reason, I have few complaints.  However, one of the local banks has approached me about being an "independent" inside the bank.  The bank has three branches in neighboring towns.  The payout is split amongst the bank, b/d, and me of course.  Has anybody been in this situation?  The idea of owning my own book and having a built in referral network from the bank is tempting, but I understand there are tradeoffs.  I would not consider changing except for the fact that there aren't that many opportunities like this in my small town.  I would appreciate any constructive feedback. 

Feb 5, 2008 10:18 am

That might work for you, but there are a few holes in the story at this point...

 
1.  What is the proposed split?
2.  Besides warm leads and space, what, if anything, is the bank offering for it's share of your commissions?
3.  Have you seen a contract yet?  What kind of escape clause is available to you if the relationship turns sour?
 
I was in a bank, but as a captive employee and I came away wholly unimpressed with bank management and how they handled producers.  Admittedly, It's left a sour taste in my mouth and I'm thus cautious when encouraging people into a bank setting.  OTOH, it's a great way to get in front of more people when you are building your book of business.
Feb 5, 2008 12:23 pm

weeedo,

Just be careful of the grass-is-greener thing. If you had said you were in a city with dozens of options, I would say go for it, as if it does not work out, you have options. Just remember, you know what you have with Jones right now, but the bank is a HUGE unknown. It is even more of an unknown than if you were going to another wirehouse. The problem is there is little consistency among different banks as far as how they structure their brokerage, payout, etc. And if it ends up being a bust, it sounds like you have few options. I would just be real careful in your situation. This is far from a pro-Jones speech, and I am not putting down banks, because some programs are very good. But given your situation, I would be pretty nervous. And also, if the bank doesn't work, that would mean 3 employers in not that many years. I would do much more homework before I make the leap.



One caveat - it could be a windfall for you. The bank could be great and feed you all kinds of leads that could really build your business.

Feb 5, 2008 12:48 pm

Something similar worked for me (check the old threads, I'm not going to retype it).  But Indy is right on with the details.  I have seen people step into great situations, and I have seen careers crushed by moving to a bad bank setup. 

 




After you have searched the old threads, pm me for more info if you want, there are more details about my situation I will share but don't want to post.
Feb 5, 2008 3:47 pm

"I am not really unhappy with Jones, besides watching new people being given huge offices for no apparent good reason, "



Just as these reps have seen their opportunity, this one at the bank may be your opportunity.

Feb 5, 2008 4:53 pm
josephjones107:

"I am not really unhappy with Jones, besides watching new people being given huge offices for no apparent good reason, "

Just as these reps have seen their opportunity, this one at the bank may be your opportunity.

 
 
 
I couldn't agree more.
Feb 5, 2008 6:25 pm

don't do it. I've spoken to indies who were stationed inside a bank and they are wanting out. skip the step, put your head down for another couple years and go indy. I was with a bank prior to going indy. It was a bad situation. Glad I'm gone. I was with Jones before the bank.

Feb 5, 2008 6:53 pm

The devil is in the details:



1 - Will you have access to bank assets?

2 - Will pb's & the manager be good referral sources for you?

        Get you involved in a new acct openings.

        Pull you into loan closings.

        Introduce you to business clients.

        Bringing you in to 'save' money is not enough.

What's the history been?

3 - What's the income split? Is the bank compensated enough to push assets towards you? Let's say that your average sale is $50K in a mutual fund. Dealer concession on that $50K sale is 3.75%($1875). The alternative for the bank is put that $50K in a cd. Their spread on that cd might be 1 1/2% or so. So, if their split is less than 40%(1.5/3.75) they're losing money by referring you the business instead of dropping it in a cd. This doesn't take into account your occupancy costs, goodwill, etc. This is one of the reasons annuities do so well in banks. The customer base for annuities are there & the payout is hidden & much higher than funds. The bank has a better chance of making money this way.

4 - How does the bank score itself? Accounts opened and closed is a no go. Revenue growth & consistent income is what you want. The fee income we provide on a $25K sale is multiple of what they make on a checking/savings acct's.

5 - What will the bank require you to do from a time perspective? Who do you report to? What happens if you want to take a vacation?

6 - Do they take a piece of you trailers? You can argue for a higher payout if they do.

7 - How do they feel about wrap business? Pays little now(and certainly less than the bank alternatives do) but is a sticky asset.

8 - What happens if this doesn't work out & you leave the bank?



I'm a big proponent of good bank programs. You know where the money is, and that makes all the difference.



Get some or all of the answers to these things in writing before you go.



Good luck!

Feb 5, 2008 10:35 pm

I worked in the bank environment for ten years.  My biggest issue was that the comp plan was a moving target, and it moved annually, and it moved mostly down.  It may look good the first year but you can't know what it's going to be after three years, or five years...

Feb 6, 2008 1:18 pm
tsims10s:

I worked in the bank environment for ten years.  My biggest issue was that the comp plan was a moving target, and it moved annually, and it moved mostly down.  It may look good the first year but you can't know what it's going to be after three years, or five years...

 
I didn't stay ten years, but had an identical experience with the comp.  The original poster may be in a very different situation since it is labled as an independent inside of the bank.  Depending on how the contract is drawn up, he could have a lot more leverage than you and I did as W-2 employees.
 
That brings up another point that needs to be made...if you get the point of signing a contract, have an attorney who's on your side review it to make sure you're being taken care of.  If the bank's attorney draws it up, who do you suppose it favors?
Feb 6, 2008 5:36 pm

amen tsim. I expienced the annual comp change as well.

Feb 7, 2008 10:19 am

The annual comp is a fequent issue that comes up, but I don't think at a smaller bank it would be an issue.  The bigger issue for a small bank in my opinion would be how the relationship will work between the bank and the advisor.  I have a buddy in another bank program who told me he is lucky to get 1-2 referrals a month.  When he first started, several of the bankers saw him as a threat and the competition, and kept their best customers away from him.  Over a number of years he has built up relationships with them, but initially ownership was the only ally he had at the bank, and they were somewhat lukewarm, they just wanted him to catch the assets they were absolutely positively about to lose anyway.


I would think in a small town it would be easy to build the relationships with your clients.  If the bank gig doesn't work out, then in a couple of years if you are doing it right you can just start your own practice anyway.  I wouldn't go into this lightly, and I would want to make sure that at least initially the bank was going to be supportive.  But at the end of the day, I think if they try to change the game on you after you have burned your bridges with Jones, you still have a pretty good escape strategy.
Feb 7, 2008 10:21 am

Good grief, I just used 4 cliches in the last sentence alone.  I stand behind the ideas, but apologize for the wording.

Feb 7, 2008 11:33 am
EDJ4now:

The annual comp is a fequent issue that comes up, but I don't think at a smaller bank it would be an issue.  The bigger issue for a small bank in my opinion would be how the relationship will work between the bank and the advisor.  I have a buddy in another bank program who told me he is lucky to get 1-2 referrals a month.  When he first started, several of the bankers saw him as a threat and the competition, and kept their best customers away from him.  Over a number of years he has built up relationships with them, but initially ownership was the only ally he had at the bank, and they were somewhat lukewarm, they just wanted him to catch the assets they were absolutely positively about to lose anyway.


I would think in a small town it would be easy to build the relationships with your clients.  If the bank gig doesn't work out, then in a couple of years if you are doing it right you can just start your own practice anyway.  I wouldn't go into this lightly, and I would want to make sure that at least initially the bank was going to be supportive.  But at the end of the day, I think if they try to change the game on you after you have burned your bridges with Jones, you still have a pretty good escape strategy.
 
IMHO, I would try to go from Jones to independant, and try to skip the bank step, if that is the ultimate course.  I guess in his case, it depends on whether that bank has any rights to the clients or not.  If they don't, then you're right, he can just pack up and move his clients (without the ACAT issues).  If they are somehow tethered to the bank, I would be careful.
Feb 7, 2008 12:27 pm

B24,

I agree. Just adding another step, with new contractual obilgations and legal issues.  His/her clients are currently "tethered" to E Jones, so he needs to be careful whether going to the bank or going independant.
Feb 10, 2008 2:30 pm

One advantage to going the bank route for a few years is to build that money line before going Indy.  You can raise a LOT of money in a bank program.  You may only take 30% - 50% of that $ with you, but it will be worth it. 

Take less up front to shorten the time frame of the deal.
 
real world .02
Feb 11, 2008 6:56 am

I wanted to say thank you for all the people who have given great feedback on my situation.  You have all been very helpful.  I have not made any decisions yet.  I am still gathering information and want to make sure this is a good choice for my family and I.   The broker dealer has gotten me some names of people who have made the same switch.  Also, I have gotten a better handle on what my expenses would be.   I will let you all know what decision I make.  Hopefully, I can get enough information to make it soon.  Thanks again!

Feb 11, 2008 7:03 am

Stay at Jones.  Put your head down and work hard, and ignore that others who are less deserving are getting bigger perks.

 
I walked away from a nice book at a wirehouse for that very reason.  I got sick of the culture, sick of bad brokers who did dirty business being rewarded and held up to the rest of us as Gods because of their production, sick of our firm being in the paper daily for wrongdoing...  Consequently, I threw the baby out with the bathwater and left the industry all together.
 
In retrospect, it wasn't the industry it was the wrong environment for me, and my new company folded after 6 months.  I decided to check out banks for the obvious reason I had to start rebuilding.
 
The biggest problem I have found with banks is they just do not get our business.  Especially a little community bank.  They will also be very protective of their clients, because they don't want to risk the relationship.
 
Check the comp plan, draw, forgiveable or not?
Check the past history - how many reps have they had?  That's a big factor.
Check if they will let you use your own referral network of CPAs, Attys.  Most banks have CPAs and Attys on their board and want you to refer to them, though you might not get referrals back.  They don't want outsiders as again that puts the relationship at risk.
Check if you are free to prospect on your own.  Some banks keep their brokers on avery tight leash and dictate what they can do as far as marketing.
Check if they will adhere to compliance regs.
Check the technology they use at the B/D.  Ask to see it.  Most bank programs are pitiful.  Not even basics like performance reporting or basic planning tools.
Check what products they want you to sell, or more importantly what the ROA is they expect - most bank B/Ds build their projections on 4% ROA because most bank reps do mutual fund B shs and annuities.  All they'll see is the revenue, they won't care that it's building a good fee-based base.
Check if there is ANY kind of sales culture at the bank.  Are there goals for referrals?   Are there training sessions allowed onf referrals?  Are there criteria for the referrals?  Most banks will not let you set minimums.
 
Just some things to think about.  Every program is different, and you might find a good one.  The key is know what to ask.
 
Feb 12, 2008 10:03 am

The bank culture really sucks. After a while you're just going to get depressed about having to come to work at the branch. Don't do it.