Recruiting Deals
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Work wherever you want, donatello my friend, but don’t sell
yourself short - your success is far more due to you and your abilities
than it is your firm or it’s capabilities. That will be true whether
you choose to stay OR go. Good luck with your due diligence.
Never a truer word was said.
I dont want to get involved in this debate, because i have to admit i just dont know enough about the indies. But i have a question (actually two) for the Indies - if you have the ability to run portfolios on a discretionary basis - do you have the technology that allows you do trade 30-40-50 accounts as one? I run 3 models, and have all the accounts on the system segregated by model. If i want to do a trade in one model, say, bring all of my accounts in model 1 up to 4 % in their position in IBM, i do one block trade, and the system allocates the stock to all the accounts accordingly. Just curious if you Indies have that platform available.
Second question, and i know this is one that i should know the answer to, but i dont, i never paid attention to it before. Never needed to. Been at a wire my entire 9 year career, never thought about anything else. Can someone explain the diff to me between being an RIA, and going Indie?
Last point, this thread goes to a question that i have struggled with my whole career. This thing about being the trusted advisor and taking care of all their financial needs. I am a CFP, so i guess i sort of buy into the idea of speaking with clients on a big picture basis. And i was trained and always taught to take a planning approach to 'strenghten the relationship" and “take the focus off performance”.
But it seems to me that clients and prospects come to us for Asset Management, and at the end of the day, they dont give a rats ass how good we are at analyzing their cash flow, or doing an insurance review. They want us to manage their money first and foremost.
So this is something i struggle with, and go back and forth on, in my own mind. Curious to hear others thoughts.
Actually (in the edit post mode right now), this started out as a recruiting thread, didnt mean to hijack it, i am going to post the last part of this under a new thread , sorry guys.
[quote=Sportsfreakbob]
I dont want to get involved in this debate, because i have to admit i just dont know enough about the indies. But i have a question (actually two) for the Indies - if you have the ability to run portfolios on a discretionary basis - do you have the technology that allows you do trade 30-40-50 accounts as one? I run 3 models, and have all the accounts on the system segregated by model. If i want to do a trade in one model, say, bring all of my accounts in model 1 up to 4 % in their position in IBM, i do one block trade, and the system allocates the stock to all the accounts accordingly. Just curious if you Indies have that platform available. [/quote]
Yes. Absolutely. That technology is readily available from several sources.
[quote=Sportsfreakbob]
Second question, and i know this is one that i should know the answer to, but i dont, i never paid attention to it before. Never needed to. Been at a wire my entire 9 year career, never thought about anything else. Can someone explain the diff to me between being an RIA, and going Indie?
[/quote]
Ah, yes - you are in good company with this confusion. This is a common and recurring issue. The term “independent” or "indy"as used in
this industry has essentially been co-opted and rendered about as
ambiguous, at its core, as “financial advisor.” It can mean so much,
that it ends up having little useful meaning.
Compounding the situation is the the big b/ds have zero incentive to educate you on this, as it is essentially their competition. As a result, you have to be willing to show some initiative and do your own research. This proves to be a great process of natural selection, because those who lack the intitiative to explore options independently by definition have no business GOING independent.
This has been addressed in some detail on several occasions, which you can find if you do a search on RIA. Here is a link to one such thread that may be helpful.
http://forums.registeredrep.com/forum_posts.asp?TID=6218&PN=1
Morphius,
The few points I've thrown out to you have not even partially been answered, which I expect. But to clarify the first point first on the discretionary account management: Are you saying that you can purchase, for your client, institutional share prices of stock through a program you don't have on your system but can buy the program somewhere? So you can do exactly what a PM at American Funds can do---purchasing STOCK in an account and buying at the level that American Funds can buy-cheaper than the rest of the retail world? You have to pay for it? It's extra? What's the name of the program? Let's start there and then I will go to the next point. And just so you know, this is an academic debate and not a dig at your firm. No hard feelings at all. If I'm wrong, I'm a good enough person to admit. Let's just spar for a bit on friendly terms.Maybe I am missing something, but I am having a hard time understading this institutional price comment. Everyone purchases equities at the prevailing market price. I have used half a dozen DMA platforms including all the current and former ECNs and systems from many of the wirehouses offered to institutions. I am at a wirehouse now in retail and while your wirehouse or retail plaftorm may have a shitty interface, and slow execution, equity trades are done at market prices in the year 2008. What are these better prices you guys are discussing?
[quote=donatello]Morphius,
The few points I've thrown out to you have not even partially been answered, which I expect.But to clarify the first point first on the discretionary account management: Are you saying that you can purchase, for your client, institutional share prices of stock through a program you don't have on your system but can buy the program somewhere? So you can do exactly what a PM at American Funds can do---purchasing STOCK in an account and buying at the level that American Funds can buy-cheaper than the rest of the retail world? You have to pay for it? It's extra? What's the name of the program? Let's start there and then I will go to the next point. And just so you know, this is an academic debate and not a dig at your firm. No hard feelings at all. If I'm wrong, I'm a good enough person to admit. Let's just spar for a bit on friendly terms.[/quote]
donatello,
Friendly sparring is fine with me. What in the world do you mean by "institutional share prices of stock through a program?" There is only one price for a publicly traded stock, and it is the same for me as for the American Finds PM. And how does one buy it "through a program?"
Morph - thanks for the comments - i will go to the link you included and do my research.
regarding institutional prices - i can only assume he means to refer to institutional share classes of MF’s. This comment confuses me as well.
What Morphius and Bob, you guys don't think Donatello can call up the market maker and say, "MSFT is trading at $28. I'd like to buy it at $20 because I'm at a wirehouse"? Seems completely plausible to me............donatello,
Friendly sparring is fine with me. What in the world do you mean by “institutional share prices of stock through a program?” There is only one price for a publicly traded stock, and it is the same for me as for the American Finds PM. And how does one buy it “through a program?”
Morphius,
You just made my jaw drop! I would love to explain the difference between the price you can purchase stock and the price a portfolio manager can purchase stock at, but pm me if you really want to know for time's sake. Let's go on to the second point. Line of credits, and commercial real estate deals and construction loan lending. ALL of us who have been in the business for a while (at my firm) do these accounts. Every client that I have with over $250k in a regular account has a line of credit opened. These individuals can borrow money cheaper than most people. We have discretion to discount the amount, based on the size of account. These lines of credit are not margin and therefore not under the SEC, and they go off the LIBOR index--LIBOR + 1, 1/2 whatever--like a bank. (We can already do that since we own two banks) Now to focus, we are talking about capabilities at ML/BofA vs. independent-specifically LPL, and my point is you do NOT have the capabilities I have and competition becomes much harder for you in the future. I have never taken an account from LPL and have never had a client give me a statement from them, for the record. In saying that, LPL is a fine firm and I think my buddy who is in your top 10% revenue for your firm is one of the most intelligent individuals I know. But that does not change your capabilities. Again, let's try another lending scenario. I had a client come to me wanting to build a house. He wanted to do one closing and do a construction to permanent loan---drafts to the builder (one closing-one closing cost). I made several thousand dollars on this-a good percantage of the loan and I keep the lending product on my books further adding to revenue that counts towards my bonus. Can you do it?[quote=donatello]Morphius,
You just made my jaw drop! I would love to explain the difference between the price you can purchase stock and the price a portfolio manager can purchase stock at, but pm me if you really want to know for time's sake.[/quote]It takes less time to explain something via PM than posting here? No, I'm content to have you explain this to silly old me right here so we can all learn from you.
Exactly HOW can a PM purchase stock at a different price than me? And what "program" is involved?
[quote=donatello]Let's go on to the second point.[/quote]
As you said, let's take these things one at a time. Once we resolve the share price/discretionary account confusion I'll be happy to address the second point. You do want to resolve that issue, don't you?
BAC will put a stranglehold on Merrill to the likes noone has ever seen. I know, I worked for them as an FA. Compliance will be so stieffling, frustration will get the best of most FA’s and departures will be enormous.
In addition to which, does anyone really think that BAC is going to refer their “customers” to ML FA’s? No way. Its actually the reverse, just like Citi, they will have their people all over the ML FA;s to get them to sell BAC services like checking and credit cards.
They will also do all the things to piss off the ML FA;s that Citi did to SB for the last 10 years. Its only the last year or two that Citi finally got it, understood the culture difference. Now they only piss us off if they absolutley have no choice.
ML/BAC has a long learning curve ahead of them.
By the way, i too, am curious as to how the PM can buy MSFT cheaper than an FA can. Post it publicly, not in a PM, for the greater good.
Back to the thread at hand: recruiting deals. I am curious—has this stuff shut down recruiting by ML managers? Let’s make the assumption there is someone that would GO there given the market and Merrill’s role in it (a stretch): are they spending money on deals, etc?
As of last week, the local ML BOM was calling into my branch trying to
recruit, so the short answer is no. But - big but - i wonder what this
environment is going to do to recruiting, notwithstanding the BAC.ML
deal.
How much longer will the banks, er i mean brokers, be willing to pay these deals?
with the tough market i think we have ahead of us, the deal size will surely shrink.
Right now i think there is a flurry of activiy, firms trying to pick
off ML and MS brokers who are scared shitless. But after this, i think
it may be over for a while.
JMHO
I agree–things go in cycles and maybe we have hit (or are AT) the top of the deal size cycle. Here’s a thought for the semi-lazy: go to ML assuming there will be some level of exodus once BAC sinks their teeth in. They have enough FAs with lots of AUM who won’t take every single account with, and you fill back up any assets you can’t pull over in your own move. “Piker” thinking, but good, no? Or at least creative.
[quote=donatello]Morphius,
So you can do exactly what a PM at American Funds can do---purchasing STOCK in an account and buying at the level that American Funds can buy-cheaper than the rest of the retail world? [/quote]That's an interesting comment Donatello. Why don't you explain to us how a PM at American Funds(or anywhere else) is able to execute trades outside the quoted market price? That's what you're implying, isn't it?
I think that Merrill will still be recruiting. A very large percentage of top producers are waiting to see the retention package but have started to open the lines of communication so that an exit strategy is in place (always a good idea). Once the dust settles, look for Merrill/BofA to continue their “hire everyone” growth strategy to replace the empty seats left behind by the mass exodus that is awaiting them.
Current deals from the firms that I represent are in the 200-220% of T12 range plus a replacement of deferred comp for proven producers. I have to agree w/ Cowboy that we might be at a top for deal sizes. With so many Lehman brokers filling seats, Bear guys already moved, and a ton of Merrill people in the wings - look for the top receiving firms to possibly go into "digestion" mode in the first or second quarter and deal sizes to be scaled back except for the top 10% of producers. I think that most brokers currently contemplating a move realize that there is a window of opportunity rarely seen - clients are more receptive in moving to another firm right now if it is perceived as an upgrade in financial security (thanks CNBC). As the principal of a recruiting firm that is normally 80-20 capital markets/brokerage, we as a firm are 80-20 the other way this year due to the lack of hiring in capital markets and having the national FC recruiting contacts at the right platforms. This has exploded the FC placement portion of our business. I do not see this trend ending and I think that January (1099's from one firm) will be the largest FC migration month in history.donatello,
Still no word on how a portfolio manager can buy stock at a different price than the rest of us? That’s OK, my friend, don’t stress out over this. It’s not about winning or losing an argument, it’s about getting closer to the truth.
Ask yourself this : what if some of your other assumptions about differences between the capabilities of wirehouses and independents are also off base? You wouldn’t be the first one to find themselves in that situation. I was there myself, once upon a time. In fact, I was way worse than you. But I was open to learning, and that made all the difference.
Just open your eyes to the possibility that some of your wirehouse vs. indy assumptions might - just possibly - be worth honestly re-examining. For your own benefit.
Good luck.
[quote=Morphius]
[quote=donatello]Morphius,
You just made my jaw drop! I would love to explain the difference between the price you can purchase stock and the price a portfolio manager can purchase stock at, but pm me if you really want to know for time's sake.[/quote]It takes less time to explain something via PM than posting here? No, I'm content to have you explain this to silly old me right here so we can all learn from you.
Exactly HOW can a PM purchase stock at a different price than me? And what "program" is involved?
[quote=donatello]Let's go on to the second point.[/quote]
As you said, let's take these things one at a time. Once we resolve the share price/discretionary account confusion I'll be happy to address the second point. You do want to resolve that issue, don't you?
[/quote]
I recently moved (about 4 months ago) - left BAC, which truly is a hideous place to work. I considered the Indy route but was too chicken. The question I kept asking was how do you deal with the liability involved in what we do (I am also a CFP) without having a strong guard behind you? The RIA has to do his brochure thing then no one is checking behind him. Most of the Indies in my town are slamming Par Life insurance and A shares from whomever is paying the highest Y-T-B. Unless the investor gets a second opinion, they never know. (I said most not all - there are a couple of very sharp boutique shops which I envy).
THen there are the other resources from software to subject matter experts I can draw from when with a big firm. I also like being exposed with others from my firm from other places, like the Bible says, "iron sharpens iron."
I agree the research is crap everywhere but we all read it to some extent. I also anticipate one answer that being the pay difference is what it is for a reason.
As far as the lending at LIBOR business goes - most - or very many banks will not lend on a portfolio unless they have it in their custody. They are no longer merely satisfied with a copy of the statement with the pledge on the stencil. I will admit, that it is a very small portion of what I do, they usually involve large relationships.
[quote=bancofamigo]Most of the Indies in my town are slamming Par Life insurance and A shares from whomever is paying the highest Y-T-B. Unless the investor gets a second opinion, they never know. (I said most not all - there are a couple of very sharp boutique shops which I envy).
[/quote]
Keep in mind that these assertions are being made by the same individual who insisted that Bank of America used to own Dean Witter. Consider the source.