[quote=pratoman]There is no doubt in my mind that with Sally back, this whole situation will be fixed, and SB will be back on top sooner than many people think.[/quote]

My question is when was Smith Barney every "on top"?  I don't think they have been anywhere close to the "top" of the industry ever.  The citigroup acquisition helped, but they were never on top or will ever be.   

Bull- how long have you been in the business? About 6 months- maybe???

[quote=BullBroker]

[quote=pratoman]There is no doubt in my mind that with Sally back, this whole situation will be fixed, and SB will be back on top sooner than many people think.[/quote]

My question is when was Smith Barney every "on top"?  I don't think they have been anywhere close to the "top" of the industry ever.  The citigroup acquisition helped, but they were never on top or will ever be.   

[/quote]

I stand corrected - I suppose the phrase "on top" can have many meanings, so let me rephrase/explain what I meant. I believe, by many (maybe not all, but I think by many) metrics, SB just a few years ago was the firm of choice among THOSE WHO CHOSE THE WIREHOUSE ROUTE" Thats not the case any more, but I believe it will revert at some point in the not too distant future.

Just my humble opinion, I dont like to argue, just conversation (unless of course, I am arguing with the idiot FreedomAdvocate/parachute/etc.)

Salomon Smith Barney (pre Chuck Prince) was an outstanding and very entrepreneurial firm. It was regularly ranked top by registered rep in terms of broker satisfaction and average production. That all started to change in 2002, when the scandal-ridden CEO of Citigroup, Sandy Weill, was essentially forced into retirement and the firm became embroiled in several scandals - namely Worldcom. The result has been a steady slide since then, culminating in the most recent crisis situation.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

The investment banking scandals that emerged in 2001-2003 revealed a high level of corruption and self-dealing at the highest levels of the company and the result was an overreaction by the senior management and board of Citigroup. Despite some efforts by Weil, he never really found a successor and in the very end, chose to put his attorney out as his heir apparent in the twilight of his rule. Prince had no significant leadership experience and had worked for Weill since the late 70s. He was woefully unprepared to handle the job and his attorney background made him very risk averse. Add to this his lack of personal charisma and the fact that two very obvious replacements for his job (Robert Rubin and Sally Krawchek) have always been waiting in the wings and this created an atmosphere where there was competition in the executive suite, despite Weill's patronage of Prince. As a consequence, there was competititon in the wake of scandal to be seen as the most tough on "threats to the brand" and "ethics". By 2003, it became clear that the only specific goal across Citi was "best compliance in the industry".

Weil had always been a cheap CEO and the joke was always that Citigroup was a great stock to own, but a terrible company to work for. Weil built his reputation and Citi on a foundation of acquisition of distressed (or merely weak) companies that he would then take over, cut expenses and foster an environment in which is was easy to make money. Products were supported, and brokers were to be rewarded based on their productivity. This worked quite nicely, actually, as the people who were the most productive were drawn to Citigroup’s various divisions - intrigued by a productive culture and the perception of boundless possibilities in the first truly global financial services company. This fostered an entrepreneurial atmosphere that was widely respected by other firms. Brokers generally liked and admired Weil. The feeling of the firm in 2000 was one of excellence and success. Even as late as 2003, SB was described by Deutsche Bank’s analysts as the industry model and the most desirable firm for brokers.

Smith Barney suffered as much from the scandals of worldcom as it did from neglect; Prince correctly saw Citigroup’s best investments as being in foreign (particularly emerging markets) and by and large has wanted to direct most of his attention on his international strategy, not a domestic operation like Smith Barney. So, when Prince took over, he was compelled to seek a simple and uncomplicated approach to the Smith Barney business; He kept the culture of cheapness, but attempted to implement a much more compliant (and thus theoretically less complicated) regime. In all fairness, it wasn’t just Chuck - regulator mandates, a lack of investment in technology, combined with pressures to reduce expenses, didn’t help.

This led to an environment where administrative personnel, compliance and management all saw their workload increase dramatically, as did their stress level – without the tools to properly address the issues they were supposed to monitor. (Citi even attempted to have BOMs at Smith Barney bear the cost of litigation expenses at one point.) Prince’s lack of attention to SB resulted in a lack of clarity by managers on what the strategic goals of the company were and what kind of policies should be implemented. Add that to the increased workload, and widespread departures from management occurred and an accelerated rise in young managers, who lacked the experience or ability to properly do their vastly expanded jobs. With a lack of direction, they accepted the only two clear mandates that came out of <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />New York – be profitable and don’t get in any trouble. Managers advanced based on only those two directives. This naturally fostered an environment characterized by dictatorial management styles and a cover you’re a** mindset.

In the last few years, widespread departures from the firm were largely concealed by the Legg Mason acquisition, the aggressive recruitment of brokers from Morgan Stanley and the fact that Smith Barney, at 5-7% of revenues, (while technically a separately reporting entity) is buried in the income statement of Citi. A Bear Market allowed cover for poor management, and as long as branches remained profitable, even through cost controls, rather than new business development, management was satisfied.

The “compliance culture” created by the Prince regime (and lets not forget Mr. Spitzer either), and the accelerated advancement of inexperienced managers didn’t just damage morale, it severely stifled entrepreneurship, as this new crop of managers were encouraged to be very conservative by nature. “If I keep my nose clean, and the branch continues to make money – people will retire or leave above me and I’ll be advanced by default” must be in the minds of many SB managers – and they’d be right to think so. Accordingly the management at SB effectively became anti-new business. Branches first focus was not opening new accounts, but rather compliance. Lawsuits cost money you have - if you're not sure how or with whom to develop your business, your approach is going to be very cautious.

Which brings us to the most recent lawsuit on overtime, trade errors and assistant pay; What is fairly apparent is that the upper levels of Citi management were unwilling to allow significant expenses to be incurred by this lawsuit. Accordingly, a decision was made to pass the cost as much as possible on to the FAs. What emerged is a compensation plan that effectively reduces most brokers’ pay, while largely impacting those whom the firm cares least about (lower producers). It was probably seen as the most palatable of a lousy set of options. The real flaw to it is that it will probably force out significant numbers of producers at the middle level – what you should be trying to turn into the million dollar producers of tomorrow.

And for that reason, it is a bad plan. It satisfies short term preferences (i.e. don’t cost money, don’t offend your biggest producers), but it’s eating your seed corn. My guess is that the level of departures in the $300-750k range is going to be the highest. The 80/20 rule applies here – it really is the small upper class in your branch that pays most of the bills - so management will not see their branch numbers decline dramatically and it will be tolerable to senior management – as they won’t see aggregate profitability decline (at least too much). So they will eventually decide that it was OK to cut broker pay in a significant way. I suspect that if there is a reversal, and if there are any new changes to the comp plan – they will simply be the transfer of the pay hit from one place to another. My guess is that forcing the brokers to bear the cost of the settlement’s provisions will prove acceptable to management and they won’t hesitate to do it again (and again).

But the long-term result for the company will be that there will be far fewer “up and comers” and thus eventually less new million dollar producers. The effect is one of continued, but gradual decline – the same one that took Salomon Smith Barney from its status as number one to a level of perception that was evidenced by BullBroker’s derogatory comments about Smith Barney.

Well I won’t add as lengthy a post as SF broker’s…don’t get me wrong it is chock full of information and largely on target.

I can say this-when I was first getting started in the business in the early 90’s(and boy that makes me feel old to post that), I remember going to visit a friend of a friend at the Smith Barney Harris Upham office in the Pan Am Building in Manhattan(now the MetLife Building at 200 Park Ave.).  This guy was about 3 years in, doing 350, which was good at the time.  He had a tiny cube in the bullpen, and the whole place was ROCKIN!  He had his own cold caller wedged into one corner of his cube, and so did almost everyone else.  These guys and gals were working their asses off bringing in major bank.  The atmosphere was friggin ELECTRIC with energy.  It was very cool…

San Fran broker-  That was a very impressive post.  I wonder if Greenhill is still reading and what his response will be. 

Greenhills,

With $70mm in PM assets...why in the world would you not go to the independent channel?  Assuming your track record is good, you will easily be able to port your book of business and the net payout is significantly higher.

I am with a major wirehouse, but considering going indy.  If I were in your shoes....it is a no brainer.

For what it is worth…the comment above about SB being “electric” back in the 90’s is dead accurate.  It was the best place to be.  Not so much now.  The moral has seriously dropped and the “cover the firm’s ass” mentality is finally beating the brokers down.

Maverick/goose - yep...Nothing but a bunch of horses asses running the place nowdays.  I'd surely love to get into the many many specific operation bull that has sent me over the top but best not.  The place has sure changed and this ol boy is fed up.    

S.F. broker had a lot of accurate information.  Very informed person you are.  I just can't believe how stupid management is.  They don't have feet to shoot off any more because they done shot them all.

I wont have a second thought about leaving six figures worth of stock when I leave.  They've cost me plenty more than that over the last short bit of time.  I've said my peace now.  See you all in 2008 when I am somewhere else.  

And would you recruiters leave my ass alone on the PM.  I already know exactly what I'm gonna do.  It's done.