Retention

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Nov 15, 2008 8:44 pm

I don't understand why so many fa's are waiting for retention. It's money u have to payback with interest. Am I wrong? I mean what is the benefit?

Nov 15, 2008 9:03 pm
skbroker:

I don't understand why so many fa's are waiting for retention. It's money u have to payback with interest. Am I wrong? I mean what is the benefit?

 
I'll take a stab..I have done it once and will never do it again even if they were to throw it at me (due to burdon of taxes and interest weighing you down for years).
 
My guess is most FA's are broke and its an opportunity to have some $$ and feel like you actually have as much money as your "B" clients have.
Nov 15, 2008 9:15 pm

I will respond to both posts.


1.  You are wrong, you do not have to pay it back as long as you stay.  Say you got a $600m retention bonus on a five year plan and take the upfront.  Each month $10m is paid to you plus interest, then $10m plus the interest is deducted from you post tax.  This spreads out the tax burden over 5 years in my example instead of having an additional $600m in income hit you all at once.  So you have $600m in the bank and pay taxes over time.
2.  fritz, your post is simply stupid.
Nov 15, 2008 10:12 pm
Primo:

I will respond to both posts.


1.  You are wrong, you do not have to pay it back as long as you stay.  Say you got a $600m retention bonus on a five year plan and take the upfront.  Each month $10m is paid to you plus interest, then $10m plus the interest is deducted from you post tax.  This spreads out the tax burden over 5 years in my example instead of having an additional $600m in income hit you all at once.  So you have $600m in the bank and pay taxes over time.
2.  fritz, your post is simply stupid.
 
Which part? I know how the taxes and loan work, i'm in the middle of it now.  Obviously if you keep the money in a CD or dont blow it on cars, big house etc you come out with more than they gave you regardless of taxes/interest.
 
As to most of the FA's needing the money, that is accuarate as can be from my 10 years at MS.  90% of the guys came in on deal's, had now money then have proceeded to lose it in the market nearly every instance.  I am not talking a small sample of 1-2 guys, more like 75  +.  Soon as the deal ends they are looking to leave again because they are dead broke.  If you have been in the biz can you say this is not common?  Most brokers I see have less money than any of their top clients, do you dispute that?
Nov 15, 2008 11:34 pm

If you lost the money or blew it, that is the fault of the broker, nothing to do with the bonus.  As far as the taxes being a drag, that is simply bad planning.  I will agree most brokers have less money than their top clients, what is your point?

Nov 16, 2008 7:27 am
Fritz:
 
This might be the dumbest thing I have ever heard....
 
"I'll take a stab..I have done it once and will never do it again even if they were to throw it at me (due to burdon of taxes and interest weighing you down for years)."
 
If you really believe this, then I will make you a deal, you give me $1, and I will give you 35 cents back.  That is basically what you are giving up by not taking a retention bonus (assuming you do not WANT to leave). 
Nov 16, 2008 12:13 pm
duster10:
Fritz:
 
This might be the dumbest thing I have ever heard....
 
"I'll take a stab..I have done it once and will never do it again even if they were to throw it at me (due to burdon of taxes and interest weighing you down for years)."
 
If you really believe this, then I will make you a deal, you give me $1, and I will give you 35 cents back.  That is basically what you are giving up by not taking a retention bonus (assuming you do not WANT to leave). 
 
I know, did not mean for it to come out that way...think I said in the next post that unless you blow the money you are better off..  But do think in switching firms it is not all is cracked up to be in many cases with the burdon of the deal hanging over your head..Agree retention is different.
Nov 16, 2008 2:15 pm

than why am I pay principle and interest everymonth? Am I missing something here?

Nov 16, 2008 4:01 pm
skbroker:

than why am I pay principle and interest everymonth? Am I missing something here?

 
They give you all the money upfront.  They pay you principal and interest which you immediately pay back each month for the length of the retention period.  This is done for two reasons.  First, to draw the tax consequence over time.  Second, if you quit or get fired before the end of the retention period, you have an interest bearing loan to pay back.
Nov 17, 2008 8:18 am

In an effort to get back on topic, it just simply amazes me that WS has not given any information in regards to a potential retention package.  You would think there would at leasst be some sort of time-frame.  I suppose they are using the MER package as a litmus test, which makes good business sense, but at what point does management give some guidance???  Please spare me any comments about how I should be focussed on my clients, becasue I am, I only worry about retention on the weekends.

Nov 17, 2008 8:36 am
duster10:

In an effort to get back on topic, it just simply amazes me that WS has not given any information in regards to a potential retention package.  You would think there would at leasst be some sort of time-frame.  I suppose they are using the MER package as a litmus test, which makes good business sense, but at what point does management give some guidance???  Please spare me any comments about how I should be focussed on my clients, becasue I am, I only worry about retention on the weekends.



I don't worry about your retention on the weekend...I'm too busy networking with your clients, and asking them if they're tired of their firm constantly changing names.

Nov 17, 2008 8:45 am

Thanks for the input Hyman, but to say that I am concerned about people "taking" my clients is the overstatement of the century.  I am  not worried about the name change, because I have been WS all along, and now we will become Wells, so to use that as a crutch for underperformance is pathetic.  In fact, I have gathered the same amount of assets this year as I have any other year, although the last 2 months have been somewhat slower if I am being honest. 

I truly love these guys who claim to be "networking" with my clients.  If in fact you are networking with them, then you are doing a piss poor job and you are wasting your efforts, becuase I have not had ACAT one  go out YTD (on any account in my top 150).  Please enlighten me as to your networking tactics;)
Nov 17, 2008 9:32 am

This is one weird post.

It ranks up there with the post I saw a few months ago from the FINANCIAL ADVISOR asking people on this board if it is smarter to buy or lease a vehicle.
Gee, I don't know.  Go find a copy of Money magazine.  But do you REALLY advise clients on financial matters? 
It's no wonder this is such a strange industry.  We have strange, uneducated people running money, that cannot figure out even the most basic financial decisions on their own.
It's like a CPA going onto "CPA Life" forums and asking of they should itemize or take the standard deduction.
Nov 17, 2008 10:49 am

Obviously you were smart enough to sell all of your clients equities in nov 2007 and have been sitting in cash since than right?.  I'll bet you couldn't explain the benefit of retention either. 

Nov 17, 2008 10:59 am

you sound pretty frustrated.  don't worry the market will eventually and dont need to take out your incompetence and frustration on others.  

Nov 17, 2008 7:59 pm
Ferris Bueller:

Based on his answer, I'm not convinced that Fritz actually manages people's money.

 
What part do you not understand..My point was the reason brokers worry about their retention is they need the money?  Do you not agree..based things I have seen a lump sum check of 200K, 300K, 500K or whatever is the way FA's increase their net worth overnight.  Guess if you do 35K a month in gross, at 35% grid, you take home about 7K a month, if you are not living on the street it takes awhile to save 500K.  FB do you get this or are you still living with your parents?
Nov 17, 2008 10:11 pm

"FREE MONEY" what does that mean, you are signing a contract and stuck for 8 years.  That is not free money.  But for a loser like you it is the closest thing to a nice chunk of change you'll ever see so guess for you, its hard to see that far out.

Nov 17, 2008 10:47 pm

Free Money???  The brokerage firms and banks don't give out free money.  Maybe your parents have written you a few checks, you can call that free money, I guess.  Once you move to another firm and take on a forgivable loan or sign a retention deal you become an "indentured servant" to them.  The worst part about it is that they can change anything at any time and even the big swinging d*cks can't do anything about it. I feel sorry for the MER brokers who signed it.  Just wait until the BAC deal finalizes and everyone gets blindsided by the new grid eventually.  (Who knows when, but it its coming)

Nov 17, 2008 11:05 pm

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"Free Money" is a catch phrase utilized by folks
who have signed agreements for "Big Upfront Money...Just to Keep Doing the Same
Job from the Same Desk", only to discover that the "Free" part included a set of
handcuffs. Coincidentally, these same folks keep appearing here constantly
talking about how they are always fielding great offers from the competition
but allegedly turn them down out of some sense of "integrity"
rather than admitting that it is fear and inertia that really controls their actions.

Nov 18, 2008 3:27 pm

i agree with fritz...upfront cash is usually spent on luxury items or lost in the market. then rep is locked in to a longterm contract with the firm. on top of that the rep has to pay tax each month on the $ they spent.



on a few occasions some reps make good decisions with upfront deals but they are the exception.
i took a check in last market downturn and it carried me for a while. i ended up leaving early and settling for pennies on the dollar. the lesson learned was keep $ aside to pay for taxes