Morgan Stanley/Smith Barney From A Client's POV

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Apr 14, 2009 5:18 pm

I've had an account at Smith Barney for years (changed FA's when I moved a while back).  Don't know a thing about Morgan Stanley except when I hear the name - I associate it with Sears.  I have other brokerage accounts as well - and - over the years - have increasingly moved my business to places where I can buy fixed income products (most of what I buy) on line cheap.  I like my FA at Smith Barney ok - but basically make all of my own investment decisions.  The fixed income prices at Smith Barney aren't as good as those on line - but they are better than those at other full service firms.  Also - even if my FA at Smith Barney is ok - what he will be able to offer me may differ once the firm changes (I get the impression that Morgan Stanley will be in charge).  I have until 5/30 to decide whether to move my Smith Barney account to another firm without being charged.

 
Any ideas/impressions/gossip about what this transition will mean for clients would be welcome.  Robyn
Apr 14, 2009 5:23 pm

You should move where-ever your FA goes and please do not use this forum.  It is for professionals only.

Apr 14, 2009 5:38 pm

Robyn,
 Your main goal as an investors seems to be making sure no broker makes a dime from your business. I find it ironic that you would actively seek the anonymous advice of others in his field about, basically, how to screw your broker. Besides, you're investing "online", you've got it all figured out. Good luck. If you stick around here, you'll need it.

Apr 14, 2009 5:49 pm
RobynG:

.

 
Any ideas/impressions/gossip about what this transition will mean for clients would be welcome.  Robyn
 
What it means for clients has nothing to do with what it means for you, as you're just a customer, at best.  Jump up on your desk and do your best Gorilla Trade impersonation while filling out your transfer paperwork.  Buh-bye.
Apr 14, 2009 6:49 pm

leech!

Apr 14, 2009 7:39 pm

I think if I were simply a leech I wouldn't have posted unsolicited info about bankruptcy in the thread where an unfortunate member of this chat board is facing serious problems (not that I am an expert - but perhaps I know a little more than other people here).

 
And you all basically have it wrong.  I happen to be a conservative investor with a reasonable amount of money (not Bill Gates territory by a long shot - but not peanuts either) who doesn't like to keep amounts in excess of SIPC coverage in any particular brokerage firm.  No matter what I pay for things.  I am more concerned about losing principal if a firm becomes insolvent - not an unreasonable thought these days - than paying a couple of hundred dollars extra if I buy some munis.  So I have both discount and full service brokerage firm accounts (Smith Barney and UBS are the full service ones).  OTOH - I don't like to get screwed by firms with trading desks that add so much extra to the "wholesale" prices that their brokers have to charge unreasonable amounts to make a buck.  I won't name names - I'm sure you guys know which trading desks add so many points to the "wholesale price" that it's hard for you to quote competitive prices and make a living.  If I'm going to pay more - I'd rather pay it to the broker who does some work for me - the guy who talks to me on the phone - not to some guy on the trading desk who just pushes the same buy/sell button I can push on a computer at a discount broker.  FWIW - with investinginbonds.com - it is very easy to see real time pricing these days.  I don't care if I don't get the absolute cheapest price - but I refuse to get screwed by a greedy trading desk.
 
So it was a very honest question about what you all thought the new firm would be like.  I know these are tough times in your business.  But - although I have been told that I am not supposed to be here because this is "professional board" - anyone in the whole world can read what you write.  So I would try to be at least a bit civilized.  Robyn
 
P.S.  I was an NASD arbitrator.  Don't know if that counts as "professional".
Apr 14, 2009 7:51 pm

I can't imagine things getting better for the clients or FA's in this merger...I have been there done that. Worked for the best if not one of the best firms for Clients and FA's at AG Edwards...when Big Bank/Big Brokerage gets involved, the bottom line is ALL that is important...Clients and FA's are numbers and dots on a graph.

If you want great service, and fair prices I would suggest you look for a broker at a non Bank/Investment Bank owned firm...alot of clients and brokers ar moving to firms like Stifel, Raymond James etc because you cab't trust these Big Firms as far as you can throw them.

Personally I moved to Stifel from AGE/Wachovia this year, my clients and I have never been happier. The difference in fixed income pricing is staggering, brokers at Wachovia can't compete with what I can offer now.

Apr 14, 2009 8:01 pm

my opinion is that this merger will be transparent to the client, no matter what the marketers tell you, they'll brag about economies of scale and by being large we can bring all kinds of goodies to the clients.  this is in response to robyn- u should only be at a firm that provides what u need.  fixed income is a commodity pure and simple, some firms at different times will have better yields on various products, your broker/advisor has to be willing to look for them for you and quite honestly these firms do not compensate us much for buying cds/munis/corps. 

Apr 14, 2009 8:06 pm

And another thing.  My UBS team (my FA and his assistant - who is fabulous) - well I have been with them since they were at Kidder.  Than Paine Webber - then UBS.  15-20 years?  And he is in the midwest - and I am in Florida (we were introduced by a mutual friend who's a fixed income manager).  Only met the guy once for 30 minutes when he was here in Florida to play in a golf tournament.  So I'm not exactly a flighty person - going from one firm to another to save a few bucks.  But when I read stories about big shots in the bank not wanting to travel to the US because of fear of questioning/arrests about tax fraud - it does give one pause.

 
Stuff like this makes clients nervous these days.  At least it makes me nervous (perhaps I am too nervous - but being nervous has served me well in recent years).  I am not the kind of person who is taking my $25k retirement account and moving it from a full service firm to E*Trade to become a day trader because I am down 50%.  I just wonder what the heck is going on.  And was looking for serious observations about Morgan Stanley (about which I know nothing).
 
Oh - and I forgot - I also have an account with JBH (now part of RBC).  Guess that would qualify as a full service firm too.  And my FA there is in New Jersey.  Have been with him for over 5 years.  Never met the guy in person.  Robyn 
Apr 14, 2009 8:12 pm

Morgan is a good company with a lot of the same products that your SB guy has access to right now.  They have the same kind of trading desks as well.  I wouldn't guess you're going to see a great change in the way business is done at either firm when they merge.   

 
You do understand that you came onto a forum for advisors who make a living selling people bonds (among other things), asked for advice, then said you bought your bonds online because the prices were better.  We understand that the prices are better online.  Vanguard has the following it does because they are the cheapest.  Not the best, but the cheapest.  It's like getting all the advice on what flat screen to buy from the guy at the boutique shop, then going to Best Buy to buy the thing.  Kind of rubs us the wrong way.   
 
As for your SB guy.  If he's not giving you the service you feel would be worth paying the extra bps for on your bond trades, then you need to dump him and get someone new.  The company you do business with is rather immaterial.  The advisor is what should make or break the deal.    Or you should just do everything online.  Not just your bonds, but your funds, stocks, ETFs, everything and take the advisor decision out of the picture.  Find your uber broker and give him all of your money.  I promise you that you'll get the service you feel you deserve.   
 
I'm accepting new clients by the way.  I call all of my good clients once a month.  We do baseball games in the summer.  Client appreciation events at Christmas.  And lots of other activities in between.  My firm covers your assets in the event of theft, misplacement, destruction, burglary, embezzlement or abstraction up to $1 Billion.  If you need more than the $500K SIPC insurance and the extra insurance combo, I'm sure we can arrange something.    
Apr 14, 2009 8:21 pm
RobynG:

And another thing.  My UBS team (my FA and his assistant - who is fabulous) - well I have been with them since they were at Kidder.  Than Paine Webber - then UBS.  15-20 years?  And he is in the midwest - and I am in Florida (we were introduced by a mutual friend who's a fixed income manager).  Only met the guy once for 30 minutes when he was here in Florida to play in a golf tournament.  So I'm not exactly a flighty person - going from one firm to another to save a few bucks.  But when I read stories about big shots in the bank not wanting to travel to the US because of fear of questioning/arrests about tax fraud - it does give one pause.

 
Stuff like this makes clients nervous these days.  At least it makes me nervous (perhaps I am too nervous - but being nervous has served me well in recent years).  I am not the kind of person who is taking my $25k retirement account and moving it from a full service firm to E*Trade to become a day trader because I am down 50%.  I just wonder what the heck is going on.  And was looking for serious observations about Morgan Stanley (about which I know nothing).
 
Oh - and I forgot - I also have an account with JBH (now part of RBC).  Guess that would qualify as a full service firm too.  And my FA there is in New Jersey.  Have been with him for over 5 years.  Never met the guy in person.  Robyn 
 
Very good posts.  Educated investors make the best clients.  Every wirehouse is going to mark up bonds 1/8 - 1/2 for the desk, to get the best buys, you just need a broker who can sort through inventories and find the bonds that fits the quality, maturity and coupon you are looking for.  This market is so sloppy, a full service broker can get you the best deals if he/she knows what to look for.  Most online sources I have seen don't actually own the bonds they are showing, they are just showing other dealer offerings.  A firm like MS/SB is going to have a huge inventory of muni's, there will definitely be some cheap ones in their if your guy knows what he is looking at. If you like him, stay, you will be fine.
Apr 14, 2009 9:00 pm

Didn't mean to be so brash with my "leech" comment, but you would drive many advisors nuts. I commend you for your research but it sounds like you should just do your own investing.



The one thing I don't understand is that you are very nervous and yet you trust your money with brokers you only met once. I don't get that at all.

Apr 15, 2009 8:55 am

RobynG:

who doesn't like to keep amounts in excess of SIPC coverage in any particular brokerage firm.  No matter what I pay for things.  I am more concerned about losing principal if a firm becomes insolvent -

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With your background in the industry you should be informed enough to know that you won't lose principal if the firm you deal with folds (with very limited exceptions having to do with proprietary products you may own). Most every firm carries insurance well in excess of their SIPC coverage and your assets aren't part of their balance sheets to begin with.


 


RobynG:

So I have both discount and full service brokerage firm accounts (Smith Barney and UBS are the full service ones). 


 


I wouldn't deal with a client that was trying to cherry pick pricing. I wouldn't trust you to not take my ideas and execute them on your discount trading platform. Life's too short to deal with people you can't trust.


 


RobynG:

So it was a very honest question about what you all thought the new firm would be like. 


 


For you, the customer (others were right, you're not really a client) as others have mentioned, there are advantages, like increased fixed income inventory. The real question is will this new firm stress client service assistance to your rep, or will it cut corners on staffing and technology and limit his ability to provide you with the level of service you deserve. Only time will tell on that one.


 


 


BTW, no offense intended, but if you think Sears, and not more like Goldman, when you hear MS, you're dealing with very dated perceptions.


 
Apr 15, 2009 1:15 pm

Thanks for all of these comments.  In no particular order - Conrad - I am sure my perception of MS is dated (and I've never had an account there).  That's why I asked my question.

 
Nor do I "cherry pick".  I am an experienced fixed income investor (30+ years) - and do all my own research (both in terms of deciding when to buy and what to buy).  Then I try to find out where I can buy it.  I "buy" things from firms - firms don't "sell" them to me.  For example - if there's a new issue muni I'm interested in - I'll try to find out who's in the underwriting group - and - if I have an account at one of those firms - I'll call that firm.  Smith Barney has been involved in a fair amount of new issue munis recently.  Will that continue with MS?  OTOH - Smith Barney stopped selling longer term callable CDs maybe 2-3 years ago (said they were too risky ).  Does MS offer those?
 
I realize I'm a bit unusual - but I get along fine with the firms I deal with - don't drive them nuts.  I don't bother them with silly questions - and they don't bother calling me about stuff that is of no interest to me.  If I call - they know I'm interested in buying X - and want to see if they can get it for me.
 
And that's why I don't mind dealing with brokers I've never met.  As long as they know what they're doing - I don't care what they look like.  And you can tell if a broker knows what he or she is doing.  My FA at SB was out when I called about a new issue muni a couple of months ago - and his office manager couldn't figure out how to find a new issue muni on his computer (he explained he wasn't a fixed income guy).
 
I understand how investor protection works.  One reason I "spread money around" is not only SIPC coverage - but having access to money in my brokerage accounts.  You may get your assets/money from a SIPC receiver - but not necessarily tomorrow.  FWIW - I did have a brokered CD go belly up last year (my first experience with that).  The FDIC did make good on it - but not the next day (like you'd find with a neighborhood branch bank).  It took one firm 3 weeks to get the FDIC proceeds - took another firm about 5 weeks.  Luckily I didn't need the money right away.  IOW - one of my concerns is liquidity.
 
As for excess insurance over SIPC - I still have some small muni issues I bought years ago where I am almost clueless regarding worth after their insurance wrappers turned into junk.  So I am not relying on insurance for much of anything these days (and most firms seem to have their excess insurance with the same insurers).  [more to follow]
Apr 15, 2009 1:40 pm

RobynG, you know what we do for a living here, so I'm just curious, what's your employment/vocational background?  You're obviously well educated and much more informed than the average do-it-yourselfer.

Apr 15, 2009 1:42 pm
mnbondguy:
 
Very good posts.  Educated investors make the best clients.  Every wirehouse is going to mark up bonds 1/8 - 1/2 for the desk, to get the best buys, you just need a broker who can sort through inventories and find the bonds that fits the quality, maturity and coupon you are looking for.  This market is so sloppy, a full service broker can get you the best deals if he/she knows what to look for.  Most online sources I have seen don't actually own the bonds they are showing, they are just showing other dealer offerings.  A firm like MS/SB is going to have a huge inventory of muni's, there will definitely be some cheap ones in their if your guy knows what he is looking at. If you like him, stay, you will be fine.
 
I agree with you for the most part.  Two of the 3 "on-line" firms I use (E*Trade and Zionsdirect) for munis/brokered CDs (don't do corporates these days) don't own a thing.  They simply pass on BondDesk listings - totally unfiltered.  The third - Fidelity - uses BondDesk too.  Although it offers tons of munis - its CD offerings are much more limited.  Fidelity also sometimes offers things from its own inventory (Fidelity has also started getting into underwriting new munis recently as well).  Many full service firms use BondDesk.  Some don't.  Some offer things from their own inventory - others have really cut back on inventory in recent years.
 
I do think my SB FA can run through lists and figure out what's cheap - and what's expensive.  Depending on the market - he can sometimes get me a somewhat cheaper price than his trading desk quotes him originally.  I have obviously never dealt directly with the trading desk at SB - but it always seemed a lot more reasonable to me than - for example - the trading desk at MER (haven't had an account there for a long time).  IOW - I have no problems with him at all - and am not looking for an excuse to get rid of him.  Just wonder how things might change under MS.
 
To call the muni market during the last year "sloppy" is a bit of an understatement .  Especially on the couple of occasions when hedge funds and the like were puking up munis to meet margin calls.  (I chart a couple of muni things - and when I would see the charts spike - I would say to myself - here we go again!).  Things have settled down in recent months - but I still think that parts of the muni market are priced attractively (although not at distress levels).  Robyn
Apr 15, 2009 1:54 pm
sickowire:

my opinion is that this merger will be transparent to the client, no matter what the marketers tell you, they'll brag about economies of scale and by being large we can bring all kinds of goodies to the clients.  this is in response to robyn- u should only be at a firm that provides what u need.  fixed income is a commodity pure and simple, some firms at different times will have better yields on various products, your broker/advisor has to be willing to look for them for you and quite honestly these firms do not compensate us much for buying cds/munis/corps. 

 
I think I pretty much understand the compensation problem.  My impression is that brokers get paid best on things like new issue munis and new issue CDs.  Is my impression correct?  I generally don't bother full service brokers when I'm looking in the secondary market - because I know I won't get very good pricing - and they won't make peanuts.  What's the sense of making 2 people unhappy?
 
And I never did understand the real reason why SB stopped selling longer term callable CDs.  I thought for a lot of years that they were really good investments (although yields have recently fallen to levels I don't consider attractive).  Did the issuers stop paying reasonable fees to the firms that were selling them?
 
FWIW - I am not picking on SB.  Fidelity for years refused to offer longer term callable CDs to its customers - again giving the reason that they were too risky.  Just never understood why I could buy naked options - and not callable CDs.  Robyn
Apr 15, 2009 2:30 pm
2wheeledbeemer:

RobynG, you know what we do for a living here, so I'm just curious, what's your employment/vocational background?  You're obviously well educated and much more informed than the average do-it-yourselfer.

 
I think I mentioned I'm a retired lawyer (Cornell '68/Harvard LS '71).  My husband's a retired lawyer too.  We retired relatively young after he made a fair amount of money as a personal injury lawyer.  I was an appellate/legal research lawyer - and did a fair amount of tedious work - like cases involving insurance coverage.  So fixed income research came pretty naturally to me .  Also - my husband and I always thought that if we wanted to take big risks - he'd go back into the personal injury business.  Most people think the jury system is kind of crazy (and it is) - but it's a lot more rational than the stock market IMO.  Also - we first started working/investing when we got out of school - right before the '73-'74 recession.  Nothing like getting your fingers chopped off when you first start working/investing to make you conservative (in almost everything you do).  This is the third big real estate bust we've seen in Florida since we moved here in 1972.
 
So I have just done and studied fixed income investing for a long time (although I have to admit that nothing I have ever experienced prepared me for what has happened in the last year - pretty scary stuff).  Also got involved in the internet fairly early.  I was a SYSOP on the Compuserve financial forum starting in the late 80's.  Made friends with a lot of people in the financial industry there (those were the days when bigger deal people still talked in public on chat boards so smaller deal people like me could meet them).   Along the way - I have met and been a (mostly confidential) press source for various financial writers and reporters.  Stuff like that.  So you're right.  So I'm not exactly your average "client" when it comes to fixed income.
 
I do trade a small part of my IRA in equities (used to use Fidelity Sector Funds - now I use index ETF's).  Purely on technicals.  I am no expert when it comes to that.  About the best I can say is that if I were the head of the Harvard Endowment - I'd be rich as a result of outperforming my benchmark.  Unfortunately - real life clients like me can't eat relative performance. 
 
OTOH - I really don't know beans about "Morgan Stanley Smith Barney" (and my question here is purely for my own personal purposes).  Usually when I want to try a new firm - I do so with a little money (or no money - just to see what's there).  See how it works out.  If I don't like it - I close the account.  If I do like it - the account grows.  Over the years - different firms have met my needs better than others (my needs change - the firms change - etc.).  Sometimes I have been forced into a new firm as a result of insolvency (Kidder ---> Paine Webber) or merger (Harrisdirect ---> E*Trade).  Sometimes these forced transfers work out - sometimes they don't.  Since I have time to think about this one - I'm just trying to get information before I decide what to do.  Robyn
Apr 15, 2009 2:57 pm

Funny how no one even thinks about haggling a lawyers fee and pouring over those "billable hours"!! 


Apr 15, 2009 3:31 pm
RobynG:
 
I think I pretty much understand the compensation problem.  My impression is that brokers get paid best on things like new issue munis and new issue CDs.  Is my impression correct?  I generally don't bother full service brokers when I'm looking in the secondary market - because I know I won't get very good pricing - and they won't make peanuts.  What's the sense of making 2 people unhappy?
 
 
Generally speaking the secondary pays better. But that depends on the firm. At the wires the SC (sales credit) has been reduced as a way to act as a disincentive to the sales force. Managment steers its sales force in this way to get them away from transactional business and lead them toward fee business. The trading desks, acting as their own profit centers many times add too much vig to make their inventory competitive. This cuts into the SC the advior can add. Yet, not always the case.
 
Still, the secondary offers flexibilty that the new issue market can't. Everybody can make money. And the better fixed income guys can make money while matching or beating online pricing. It's the world in which we live, utilize the internet to our advantage. Good traders who don't bump prices beyond buyable levels are key.