I Own My Book

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Aug 8, 2006 1:55 pm

You Indy types are fond of saying, "I own my book." 


Does that mean your clients have no right to leave you?


How do you see your relationship with your book any more secure than a guy with ten years at Merrill is with his book?

Aug 8, 2006 2:08 pm

I am certainly not an expert on this subject.  Do you see how easy that is to slide a little disclaimer like that in once in a while.  I know that you never will because you are the 'All Knowing NASD'.


Anyway, the major difference would seem to be this........


If you decide to leave an Indy your retention efforts would be much easier.  For instance if you are Joe Smith of Smith investments working under the supervision of LPL and you leave, who will contact your clients? 


Hey Mr. Client.....This is Joe I am going to such and such want to go?


But Joe.....what about LPL.....hmmm.  The client doesn't even know that LPL exists.


If you leave ML you had better be ready to battle for every account that you think is "yours".


Just a thought!  I believe that this leads some to believe that they do truly "own there book"


Aug 8, 2006 2:29 pm

I think the main difference would be how it is laid out in the contract.  If one says that the rep owns the clients, then they truly own their book.  If it says that the firm owns the clients, then they don't.


Not that difficult.

Aug 8, 2006 2:37 pm

NASD, your clients ALWAYS have a right to leave you, regardless of your firm.  The question isn't "Do you own the book of business or do the clients own themselves", but "Do you own the book of business or does your firm".


To keep this even, lets make two assumptions:  Both advisors have been in the business for the same amount of time and both have equal relationships with their clients.


Should the Merrill rep decide to leave the firm (for whatever reason) they have no rights to those clients, and in fact cannot contact them to transfer their business to the new firm (no contact beyond a letter stating they are no longer w/ Merrill, the name of their new firm, new address and phone number).  The advisor can generally take clients public information (name, address, phone number) but absolutely no account info.  Merrill will assign those accounts to other brokers who will begin prospecting them immediately.  Our former Merrill rep will begin receiving calls from his former clients and can talk about transferring their accounts at that time.


If an independent advisor leaves his firm the clients become "house accounts" until they request an new Advisor (whomever they choose), but will not be assigned to anyone.  Their Indy Advisor can contact them at any time, take copies of all their account paperwork and begin transferring their accounts to the new firm (with permission, of course).  That's one of the main differences between the W-2 model and the 1099 model, and something the Indy recruiters will usually tell you: "If for whatever reason you don't like it here you can always take your clients and go somewhere else w/o interference from us."


Another difference is that as an Indy, when/if you're ready to get out of the business you can sell your book/practice on the open market to any financial advisor from any firm for any price you can negotiate.  Some of the W-2 firms allow you to sell it to another advisor within the firm (which is a great benefit over those that don't) but it is still a limited marketplace.


As far as the relationship goes it's fine at Merrill as long as the advisor and the firms goals are in line.  If they ever vary the client has to make the decision who he or she is doing business with:  You, or Merrill.  Most Indy b/d's don't advertise themselves to the client and encourage their advisors to brand themselves.  At that point there's never any conflict as to who has the relationship: It's the Advisor.


Did I articulate that well enough or are there points I missed that you'd like me to expand upon?

Aug 8, 2006 2:46 pm
moss84:

I am certainly not an expert on this subject.  Do you see how easy that is to slide a little disclaimer like that in once in a while.  I know that you never will because you are the 'All Knowing NASD'.


Anyway, the major difference would seem to be this........


If you decide to leave an Indy your retention efforts would be much easier.  For instance if you are Joe Smith of Smith investments working under the supervision of LPL and you leave, who will contact your clients? 


Hey Mr. Client.....This is Joe I am going to such and such want to go?


But Joe.....what about LPL.....hmmm.  The client doesn't even know that LPL exists.


If you leave ML you had better be ready to battle for every account that you think is "yours".


Just a thought!  I believe that this leads some to believe that they do truly "own there book"




Even simpler than that....

"Mr. Jones, this is joedabrkr.  As you know I've had some concerns with XYZ for a while now.  I've decided that as of the end of this month I am firing them and retaining the services of ABC broker dealer.  Obviously I'll get the paperwork out to you right away so we can maintain continuity of service."

No need for cloak and dagger b/s.  You own the book.  They can't fire you and attempt to retain the assets if they find out you're shopping around for another b/d.  Only thing they can do to keep you around is do their job as best they possibly can!

On the other hand, Merrill (or any other wire, bank, or regional) could fire you if they find you cozying up to  antoher firm, contemplating a move.  They can sic every other broker in your branch to chase your clients-as Newbie has described in the past.  They can hit you with a TRO to stop you from calling your clients.  They can do all sorts of things to make your life difficult.

Aug 8, 2006 2:49 pm
FreedomLvr:

NASD, your clients ALWAYS have a right to leave you, regardless of your firm.  The question isn't "Do you own the book of business or do the clients own themselves", but "Do you own the book of business or does your firm".


To keep this even, lets make two assumptions:  Both advisors have been in the business for the same amount of time and both have equal relationships with their clients.


Should the Merrill rep decide to leave the firm (for whatever reason) they have no rights to those clients, and in fact cannot contact them to transfer their business to the new firm (no contact beyond a letter stating they are no longer w/ Merrill, the name of their new firm, new address and phone number).  The advisor can generally take clients public information (name, address, phone number) but absolutely no account info.  Merrill will assign those accounts to other brokers who will begin prospecting them immediately.  Our former Merrill rep will begin receiving calls from his former clients and can talk about transferring their accounts at that time.


If an independent advisor leaves his firm the clients become "house accounts" until they request an new Advisor (whomever they choose), but will not be assigned to anyone.  Their Indy Advisor can contact them at any time, take copies of all their account paperwork and begin transferring their accounts to the new firm (with permission, of course).  That's one of the main differences between the W-2 model and the 1099 model, and something the Indy recruiters will usually tell you: "If for whatever reason you don't like it here you can always take your clients and go somewhere else w/o interference from us."


Another difference is that as an Indy, when/if you're ready to get out of the business you can sell your book/practice on the open market to any financial advisor from any firm for any price you can negotiate.  Some of the W-2 firms allow you to sell it to another advisor within the firm (which is a great benefit over those that don't) but it is still a limited marketplace.


As far as the relationship goes it's fine at Merrill as long as the advisor and the firms goals are in line.  If they ever vary the client has to make the decision who he or she is doing business with:  You, or Merrill.  Most Indy b/d's don't advertise themselves to the client and encourage their advisors to brand themselves.  At that point there's never any conflict as to who has the relationship: It's the Advisor.


Did I articulate that well enough or are there points I missed that you'd like me to expand upon?



You might want to use shorter words so he can understand you.  Also use LOTS of emoticons.  He really likes that!

Aug 8, 2006 2:57 pm

I think that was pretty well put.  I think for the most past the difference lies in perception.  Like freedomlvr's example. 


I work a MS.  My client gets a statement everymonth from MS with me named as the rep of record.  I decide to leave MS.  My clients have a pretty heave perception that they are a client of MS to a large extent, and their broker happens to be me.  So when I call and say I'm headed to ML, the have pounded in their head this feeling of going to the MS office and everything revolves around MS.  So to make a change REALLY feels like a change on many levels. 


I work at XYZ Asset Mgt.  I use Southwest Securities as my B/D, but my DBA is still "XYZ Asset Mgt.".  So my clients get a statement everymonth with "XYZ Asset Mgt." logo on it.  I decide to switch from SWS to NFP(or any other indy b/d), I can call the client and tell them that the b/d I use has changed and I need to get their accounts in line with my new b/d so we can stay on top of things.  I can tell them that nothing will change other than the company making the transactions and they won't be getting calls from the other b/d or their agents.  Nor will I be getting calls for violating any noncompete's tha may exist.  Also, in my situation my office location would not change.  That may not be the case for all (some work in a branch office of RJ, etc. ), but there is a large perception issue when your office doesn't move an inch.  They can come in for a review and we'll make sure everything gets on my new platform, as long as it is in line with the services they need. 


Most of my clients could not care less who my b/d is, unless they are all over the WSJ or CNBC for getting fined.  However, they feel strongly about my firm and whoever I chose to clear through is fine with them.  As long as the new fees and charges are all disclosed up front. 

Aug 8, 2006 2:58 pm
NASD Newbie:

You Indy types are fond of saying, "I own my book." 


Does that mean your clients have no right to leave you?


How do you see your relationship with your book any more secure than a guy with ten years at Merrill is with his book?



It's mainly from a contractual standpoint from the organization.  Clients are free to do whatever they want, but if the advisor leaves, the firm cannot, under the terms of these contracts, go after the FAs book.  It's sort of a "goodwill" gesture that shows the FA that the company is committed to their success and confident in their abilities to serve the advisor.

Aug 8, 2006 3:00 pm

everymonth = every month (2 times)


tha = that


The last sentence is not a complete sentence.


I'm sure there are more.


I BEAT YOU TO IT NASD!!


Aug 8, 2006 3:05 pm

heave = heavy

Aug 8, 2006 3:45 pm

It is not necessary to inform me about the steps taken in order to move from firm to firm.


The point of my question is to suggest that "owning your book" is actually a rather weak sister reason to become an independent.


Any wirehouse broker is going to leave with copies of the client's most recent statements (if not all of them) as well as copies of all of their account information.  If you left a wirehouse and didn't take copies of everything you could get your hands on you're a fool.


Hell, there are lots of cases where a departing broker not only took copies of his client's records he took copies of the records of every other broker in the office.  Trying to prove it is impossible.


It is true that other brokers will be asked to contact your clients, but if you have a decent relationship with them you will have already told them that you're leaving and given them a reason or two that they want to leave with you.


The only firm that seems to have more firm loyalty than individual broker loyalty is Merrill--but even their most loyal customers can be persuaded to follow a personable and capable producer.


Can't contact former clients?  Give me a break--try to find anybody who will deny you the basic right of "Freedom of association."


Like that Morgan Stanley "commerical" says--grow a pair.

Aug 8, 2006 3:58 pm

old dinosaur a.k.a NASD Newbie


Please go argue with yourself and tell who lost.

Aug 8, 2006 3:59 pm
NASD Newbie:

It is not necessary to inform me about the steps taken in order to move from firm to firm.


The point of my question is to suggest that "owning your book" is actually a rather weak sister reason to become an independent.


Any wirehouse broker is going to leave with copies of the client's most recent statements (if not all of them) as well as copies of all of their account information.  If you left a wirehouse and didn't take copies of everything you could get your hands on you're a fool.


Hell, there are lots of cases where a departing broker not only took copies of his client's records he took copies of the records of every other broker in the office.  Trying to prove it is impossible.


It is true that other brokers will be asked to contact your clients, but if you have a decent relationship with them you will have already told them that you're leaving and given them a reason or two that they want to leave with you.


The only firm that seems to have more firm loyalty than individual broker loyalty is Merrill--but even their most loyal customers can be persuaded to follow a personable and capable producer.


Can't contact former clients?  Give me a break--try to find anybody who will deny you the basic right of "Freedom of association."


Like that Morgan Stanley "commerical" says--grow a pair.



NASD, a departing broker can certainly do anything he or she wants. Just like everyone else in the world, you can choose to be honest or dishonest.  When you sign the agreement with your firm you're agreeing to abide by these rules.  I choose to honor my word and my commitments.

Aug 8, 2006 4:00 pm
FreedomLvr:
NASD Newbie:

It is not necessary to inform me about the steps taken in order to move from firm to firm.


The point of my question is to suggest that "owning your book" is actually a rather weak sister reason to become an independent.


Any wirehouse broker is going to leave with copies of the client's most recent statements (if not all of them) as well as copies of all of their account information.  If you left a wirehouse and didn't take copies of everything you could get your hands on you're a fool.


Hell, there are lots of cases where a departing broker not only took copies of his client's records he took copies of the records of every other broker in the office.  Trying to prove it is impossible.


It is true that other brokers will be asked to contact your clients, but if you have a decent relationship with them you will have already told them that you're leaving and given them a reason or two that they want to leave with you.


The only firm that seems to have more firm loyalty than individual broker loyalty is Merrill--but even their most loyal customers can be persuaded to follow a personable and capable producer.


Can't contact former clients?  Give me a break--try to find anybody who will deny you the basic right of "Freedom of association."


Like that Morgan Stanley "commerical" says--grow a pair.



NASD, a departing broker can certainly do anything he or she wants. Just like everyone else in the world, you can choose to be honest or dishonest.  When you sign the agreement with your firm you're agreeing to abide by these rules.  I choose to honor my word and my commitments.



So when you went Indy you did it cold--no records at all?

Aug 8, 2006 4:01 pm

Did you call your clients, contrary to your agreement not to do so?

Aug 8, 2006 4:08 pm

Sorry NASD, but this is my last response to one of your posts.  You don't provide value to the board, and the questions you ask are designed not to elicit thought or discussion but antagonism. 


Best of luck to you.

Aug 8, 2006 4:14 pm
FreedomLvr:

Sorry NASD, but this is my last response to one of your posts.  You don't provide value to the board, and the questions you ask are designed not to elicit thought or discussion but antagonism. 


Best of luck to you.



Wait, you're the guy who wrapped himself in priest's robes and declared that you only do what is right--I could almost hear "How Great Thou Art" playing in the background.


I'm simply wondering how such a saintly figure was able to let his clients know he was going to be going indy if he didn't contact them.


Perhaps you just stood on a corner wearing a sign board?

Aug 8, 2006 4:19 pm
NASD Newbie:
FreedomLvr:

Sorry NASD, but this is my last response to one of your posts.  You don't provide value to the board, and the questions you ask are designed not to elicit thought or discussion but antagonism. 


Best of luck to you.



Wait, you're the guy who wrapped himself in priest's robes and declared that you only do what is right--I could almost hear "How Great Thou Art" playing in the background.


I'm simply wondering how such a saintly figure was able to let his clients know he was going to be going indy if he didn't contact them.


Perhaps you just stood on a corner wearing a sign board?



You question was answered, you sanctumonious fool.  Learn to read before you post your venomous diatribes. 

Aug 8, 2006 5:37 pm
NASD Newbie:

It is not necessary to inform me about the steps taken in order to move from firm to firm.


The point of my question is to suggest that "owning your book" is actually a rather weak sister reason to become an independent.


Any wirehouse broker is going to leave with copies of the client's most recent statements (if not all of them) as well as copies of all of their account information.  If you left a wirehouse and didn't take copies of everything you could get your hands on you're a fool.


Hell, there are lots of cases where a departing broker not only took copies of his client's records he took copies of the records of every other broker in the office.  Trying to prove it is impossible.


It is true that other brokers will be asked to contact your clients, but if you have a decent relationship with them you will have already told them that you're leaving and given them a reason or two that they want to leave with you.


The only firm that seems to have more firm loyalty than individual broker loyalty is Merrill--but even their most loyal customers can be persuaded to follow a personable and capable producer.


Can't contact former clients?  Give me a break--try to find anybody who will deny you the basic right of "Freedom of association."


Like that Morgan Stanley "commerical" says--grow a pair.



Owning your book is one of the best reasons to go independent.


It has more to do with my retirement planning than anything else.  If you work at EDJ, MS or any other firm for years when you retire...that's it. Finito.  You get a nice going away party and your clients are carved up like a Christmas turkey.  When you are independent and have a business of your own, you can do many things to assure continuation of your company and sell your business based on proven revenue, among other things.


I have a close friend who owned an insurance agency and his transition plan is most likely the one that I will follow when the time comes.  He brought on an associate to work in the office for several years and by contract they negotiated a value on the book of business.  Over the course of 5 years the associate paid off the business purchase through a combination of overrides on business and cash reimbursement, all the while my friend was continuing production.  For 3 years after the purchase the former owner received a "consulting fee" and did no production.  


This was a good plan for all parties including the clients.  The burden of purchasing the business was spread over several years, the new agent got to learn the business model that my friend had set up over the years but also put his own stamp on the business.  The transition was seamless for the clients.


As to contacting former clients when going indy, there is no prohibition to sending an informative letter to them to announce your new position.  I guess I must be a fool, since all I took in the way of customer information was a mailing and telephone list of clients and prospects. (Of course I also took everything else that I had paid for myself down to the paperclips) After sending my letter, I called up to acknowledge that they received it and let the clients ask to transfer over.  About 60% of the assets transferred in just a few weeks.  People who didn't transfer or commit received newsletters and occasional calls until I decided they were not going to move and cut my losses.

Aug 8, 2006 5:51 pm

Suppose you were going to buy my book?


How do you know my clients will like you as a person? Trust you as an advisor?  Agree with your philosophy?


It's not like this is an insurance agency with policies in place that are a pain in the rear to move--if they can be moved at all.


We're talking about a service that is as potentially fickle as a dry cleaner's customer base.


Would you pay me a sum equal to last year's gross?  Two times gross?  Half of it?


I understand that we could build in clauses that require me to help you keep the book intact, that will allow you to owe less if the book flees and so forth.


My point, again, is "owning your own book" is probably little more than a statement made by recruiters when it finally becomes important.