Wachovia Finet

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Jun 29, 2007 10:42 am

AGE is saying that after conversion the different platforms of Wachovia will be available to us. I am reading the ONWallstreet article and it says that Wachovia Finet has 505 reps(only).



My question is are there any Finet reps on here?
And is it a good system?
And why are there only 505 out of 8500 reps on the independent side (question to the guys with high enough production to switch to the finet)?
Jun 29, 2007 2:10 pm

As a matter of fact, I had dinner last night with a buddy of mine that I trained with at one of the major wire houses back in the 90's.  He then spent some time working at another wire house before making the transition to FINET a few years ago.  He had a lot of insight for me about how that model, which is relatively new hence the small amount of reps in that platform, has changed in just the short amount of time he has been associated with them.  He said that ever since the merger with Pru it seems like they are running the platform more and more like the Wachovia Private Client Group.  They send out an annual survey to his clients that he has no control over - that doesn't sound like he is running his own private practice to me.  There is less autonomy now than when he first joined.  He said that when he looked at FINET and LPL when he was first doing their due diligence, they ran neck and neck.  According to him, FINET does not feel 100% independent anymore.  In fact, they just met with an LPL recruiter recently.  He said he knows of a Wachovia rep doing $900k that was looking at moving to the FINET channel and he would have to incur a 15% payout cut over the normal FINET payout for 3 years.


For the AG guys, FINET and the other platforms according to him, is the carrot they are dangling in front of you.  He has heard that they won't open that platform up to you unless you are doing $1 million+, and you can't have access to that platform and receive the retention package as well.  So, if you take the retention package, you put yourself 7 years out from doing FINET.  He did say that there may be a window for $500k+ advisors to go that route, but said there would be a significant payout reduction for 2-3 years - maybe in the 60% range.


I think you have better options on the independent side available to you if you truly want to be independent and if you don't want to expose yourself to all of those uncertainties.  If you put yourself in Wachovia's position, it a rep would be much more profitable to them in any other channel they have except FINET.


Hope this helps!

Jun 29, 2007 10:23 pm

I can't speak for reason as to why you should or should not choose Finet if your currently with AG Edwards, but I can attempt to answer your questions.


The main reason there are only 500+ FiNet advisors is because the platform has only been up and running for 5-7 years (I believe).  Secondly, their reps have a much higher average trailing 12 cmn versus their competitors (i.e. they are much more selective in who the bring on board).  From memory....FiNet's avg producer is $400k plus whereas, Raymond James is approx. $250k and LPL is somewhere less than $200k.


If you do discretionary portfolio management (where you act as the manager - not farming it out to a third party), then FiNet is really your only logical choice.  They allow you to pay an admin fee that is all inclusive with no ticket charges on the management of the accounts.  Whereas, RJ and LPL each have ticket costs associated with each trade.


For example:  If you have 100 accounts under discretionary management and you decide to buy IBM, you will pay on average a $26 ticket charge per account at LPL and RJ.  That is $2,600 each time you make a buy or sell.  This makes in uneconomical. 


However, at Finet you can pay a max of 35 basis points with no ticket charges.


In my opinion, this is a huge advantage that FiNet has over the others.


I have spent a ton of time reviewing FiNet, LPL and RJ.  LPL and RJ are quite similar, but for me FiNet takes the cake.  In addition to what I mentioned above, the culture of the company is fantastic.  I have several friends who left a major wirehouse and went to FiNet and they could not be happier.  They love it, their client's love it and they are making some serious coin.


I am surprised that more people on this forum are not in favor of FiNet over LPL and RJ -- my only guess as to the reason for that....not many on this board qualify for FiNet production levels.


I would love to hear what others think and if there is something different than what I posed in the comments above about the ticket charges.

Jun 29, 2007 10:53 pm

Whomitmayconcern is a good person to talk to.  He is with FiNet and apparently quite happy with them.

To be fair, they have their advantages.  I simply felt they were outweighed by the disadvantages, so I chose LPL.  I was concerned in part about the cultural evolution described by pghkid above:

"He said that ever since the merger with Pru it seems like they are
running the platform more and more like the Wachovia Private Client
Group.  They send out an annual survey to his clients that he has no
control over - that doesn't sound like he is running his own private
practice to me.  There is less autonomy now than when he first joined. "

Actually FiNet has been around far longer that a 'few years'.  It's the evolution from Wheat First's "Profit Formula" semi-indy platform, which became part of Wachovia when they bought First Union(who had originally bought Wheat First).

To correct the poster above, if you purchased IBM as in his example, the ticket charge would actually be $12 per trade, not $26.  That's quite a difference if you're managing a lot of accounts.

Jun 29, 2007 11:02 pm

joedabrkr -


How do you figure it would be $12 per trade?


I just met with the LPL guys and spend a ton of time on this.  They did show me a way that you could get the cost down to $22, but no one ever said anything about $12 per ticket charge.


Even if it was $12 per ticket, that is $1,200 everytime you buy and $1,200 everytime you sell - that is on top of the wrap fee you charge the client.  I do believe you have the ability to pass it along to the client, but I don't see how that would fly.


If you make 12 trades per year (only one per month) that equates to $14,400 per year per account in comissions + the wrap fee.


Doesn't seem economical to me.


LPL and RJ are not for portfolio managers - they are more for brokers that are assets gatherers and those that farm the assets out to third party managers.

Jun 29, 2007 11:30 pm

I stand corrected.  The ticket charge for a stock trade is $15.  I don't know how these guys are coming up with a number of $22.

Oh, and for what it's worth, you can push that ticket charge back out to the client.  You don't have to pay it.

Jun 29, 2007 11:50 pm

"I do believe you have the ability to pass it along to the client, but I don't see how that would fly."


Well, it does fly.  I have exactly ONE client that had a problem with this and forced me to a SAM II to get the client.  Also, $26.50 is the MAX mutual fund trade.  Many are only $5.50/trade...some are $13.00/trade, and Joe's right...stocks are $15/trade.  Most clients don't care about the little nuisance charges...we're the only ones that really make an issue of it.  The clients just care about service and performance...and it's mostly service.

Jun 30, 2007 12:03 am

By the way-from what I recall when I made a detailed comparison about 3 years ago, Wachovia had a higher 'retention' of the management fee before payout in exchange for no ticket charges.

Jun 30, 2007 8:58 am

joedabrkr-


You are right, FiNet does have a higher retention of the mgmt fee before payout in exchange for no ticket charges.  It is an extra 35 bps on the small accounts, but goes as low as 10 bps on accounts of $500k or better.


However, this still greatly works in my favor because I am a fairly active portfolio manager.  In my example above I used only 12 trades per year...in actuality, my models trade well over 100 times per year.  So the ticket charges (if even $15) would eat me (or my clients) alive.  Thus, the extra admin charge by FiNet with no ticket charges is the way to go for me.


In my analysis, I have seen that FiNet is the best for a portfolio manager.


LPL and RJ (don't know much about any others) are best suited for advisors that farm the management of assets out to third parties.


One thing I do like about RJ is that you have the ability to run your fee based portion of business through their RIA and the rest of your business through their broker/dealer.  This allows you to charge your clients for the financial plans that you create for them.  I have long thought that my clients would happily pay for the financial plans I do for them.  At my current firm, or FiNet I can not charge hard dollars for planning.


If you don't mind sharing...who out here is with FiNet?  Please feel free to Private Message me if you do not wish to post.  I would love to visit with you about the platform.  TIA.

Jun 30, 2007 1:34 pm

You're right about one thing...trading costs would be a much bigger deal to you than me...I probably trade 6-7X a year max in a typical client account, as they are mostly fund managers with a few stocks/bonds mixed in here and there.


Try Whomit, to start with, also, if you search on Wachovia and Finet, there have been at least a couple of others on here at one point that mentioned one or the other.  The problem with finding then, is that you're looking for 500 vs about 10,000 now at LPL and between 3-4000 at RJ.

Jun 30, 2007 6:57 pm
maverick/goose:

However, this still greatly works in my favor because I am a fairly active portfolio manager.  In my example above I used only 12 trades per year...in actuality, my models trade well over 100 times per year.  So the ticket charges (if even $15) would eat me (or my clients) alive.  Thus, the extra admin charge by FiNet with no ticket charges is the way to go for me.



I find it difficult at best to believe that as a retail adviser you are able to keep up with a model that trades that often.  I would call that 'trading' not portfolio management.

But hey, if it works for you, great.

Truth be told, my bs meter is flashing 'condition yellow'.

Whomitmayconcern is with FiNet as I said before, and very happy there from what I can tell.

Jun 30, 2007 8:57 pm

It is actually quite easy to understand if you know portfolio management.  It is called partial positions.  I do discretionary portfolio management where I may initially take a position of 3%, then add to the position as the market warrants.  Conversely, if a position appreciates significantly I may sell 1/3 of the position at one point, selling another 1/3 at a later point etc.


It is not unrealistic management.


Call it what you want, but I would put my track record up against your mutual funds of choice any day.


And then, as soon as you tell me how great your mutual funds are....my BS meter will be flashing "condition RED" no doubt.


Jun 30, 2007 10:34 pm

I never said a think about my mutual funds.

Oh, and I know a little about discretionary management.....since I've been doing it for about 7 years now.

Jul 1, 2007 11:44 am

After stripping out benefits and adding back ticket charges, admin, resource fees, etc.  Finet equally as profitable to Wachovia as employee model. 

At least thats what WS has been telling AGE managers as they come into StL for recent merger visits.   100 managers in STL two weeks back.

Jul 1, 2007 10:01 pm
GoingIndy????:

After stripping out benefits and adding back ticket charges, admin, resource fees, etc.  Finet equally as profitable to Wachovia as employee model.


Then why the hell won't Wachovia let AGE reps go to FINET?!!  Given the increase in payout I have as an indy compared to the days when I was a bank broker, I call this complete BS.  Wachovia wants to keep AGE reps in the more profitable model...why else would they block migration to FINET?

Jul 2, 2007 12:17 am
Indyone:
GoingIndy????:

After stripping out benefits and adding back ticket charges, admin, resource fees, etc.  Finet equally as profitable to Wachovia as employee model.


Then why the hell won't Wachovia let AGE reps go to FINET?!!  Given the increase in payout I have as an indy compared to the days when I was a bank broker, I call this complete BS.  Wachovia wants to keep AGE reps in the more profitable model...why else would they block migration to FINET?



Indy- Of course they want to keep reps in the employee model.  They already paid for the company, they believe that model has something to offer reps, and probably the biggest one, opening the indy option would only make it harder for them to retain as it brings up another decision for reps of "is their indy best? (not likely) 

I forgot to add in the post above though, it seems the finet model is built with a higher break even in mind around $350k to keep most reps in the employee model. 

and to your point, I'm sure WS is arming the bm's who bought in during the visit plenty of ammo/propaganda to sell back to the branch, including the "grass is not always greener" cd bm's got discussing indy vs wirehouse model.

Jul 2, 2007 10:23 am

I am with FINET. I have had a good experience. There are tradeoffs with FINET just as with any independent firm. To answer the question about the client survey, you can opt out if you do not want your clients surveyed. However, they are asking questions about your service and you firms service. I for one do not mind this. If you hired a consulting firm to do this for you it would cost alot of money. The payout at FINET is not as good as LPL or Raymond James. But they do not have group health insurance plan or a national name brand like Wachovia. Like it or not some of my clients like seeing a large company name on their statements. I do feel completely independent with FINET. If you want to stay transaction oriented then I would look somewhere else. If you want to be mostly fee based then I think FINET has the best platform. Take a look at them they have alot to offer. I looked at several independents and I was just concerned they would go the way of AG. I think that Wachovia has very deep pockets and FINET is here to stay.

Jul 2, 2007 10:49 am

Thanks for a fair and balanced assessment...this is what this forum should be about...

Jul 2, 2007 4:57 pm

Yes I own a Finet branch.


Here is what I like about Finet's system. In my branch (which I private branded in case I ever want to fire Finet, which is what independence is all about, that you are able to sit in the same place and change firms instead of having to leave 'a' to go to 'b' if you and your firm have a falling out. The fact that Finet knows that I, and all of us, have that capability keeps them trying to provide value for our dollar. But just like I'm a businessman, I have to be grown up enough to accept that WSFN is in business to make money too, and they're in the business of not losing money, therefore they need to make sure that I'm compliant with a set of policies designed to keep me out of arbitration. Even though I 've never been there, and even though I carry E&O, they are still going to wind up on the complaint as the deep pocket, and if you're firm isn't doing the same, then someone in Shoboygan might be shuttering your B/D right now.) Right now I have two guys that work for me in my branch on split FA numbers. All their supervision is done at the regional level. I still own the branch, I still have exposure because all trades have my number on them, but I share the risk with the firm, at no cost to me.


I think this is great. It's a very workable compromise which makes it possible to recruit from the wirehouse without expecting the prospect to become his own indy (which is more work and more confusion than most wirehousers are going to be comfortable with, especially when I am competing  with 100% up fronts and 20 deferreds). And that I can do this AND Wachovia will throw some money at the deal (which, if it's 40% it's around what the broker made last year before deductions and then you throw a solid net payout at them 50 to 60 percent and everybodies happy!) makes for a solid partner in my growing firm.


I've said here many times before that the only real reason to go Indy is to be able to leverage your office so that you have people making you money whether you show up or not. This is the essence of business that goes back to the first apprentice... goes back to the first farmers with sons, if you have a lot of sons, you can farm a bigger area and sell what you don't eat. Anyway...


70% 85% 90% who cares? the trick is when you're getting 100%+ payout based on the total of the shared #s! That's when it starts getting nice.


Let me give you this example (and invite any retiring broker to take advantage of it) Say I have a broker doing 400M. He wants to retire. I go get a $200M "failure" from a wire, getting a 25% payout. I'll give him $100M of the $400M and a 40% payout. To the retiring broker, I'll give 4 years of 20% payout override on the new guy's book (up to the $300M) therefore he's getting $60,000 per year. I do that 4 times and what have I done? I've turned $400,000 in production into $1,200,000 (of which I'm keeping between 10 and 25% net) After 4 years I bump the noob to the 60% (which keeps him from saying "I'm going Indy"). Wachovia can handle that. Can the others. I don't know, but I do know that WSFN  is the sort of partner that I think will be here to help me achieve this goal.   


Are there others that are cheaper? Are there others that are less restrictive? Are there others with more brokers? Yup, yup, yup. Maybe some day I'll be interested in talking with them. But right now I'm building my business on a rock solid foundation.


You can PM me to say hello, but I'm not a PM type of person, I'd rather keep everything out in the public eye (just my style and it has served me well over these many years.)

Jul 2, 2007 5:16 pm

To the Finet AgE/Pru question.


I've had several Pru guys over the years call me asking if they could join. It's unfortunate that they were not greenlighted.


It reminds me of when Shearson and Smith Barney joined. I was at a meeting and I asked a Barney guy what he thought of the "merger" and his response was 'Great! now there are several thousand guys I can't steal clients from!'


I've heard several justifications of why they don't want guys going from B&M to Indy. What I think they want most is to make sure of two things; first that every Tom Dick and Harry with a beef with his BOm doesn't think he'll be able to just leap with no repercussions. And second, the the Indy platform doesn't just become the first step in a Texas Two step as brokers go "Indy" and then go to the next wirehouse with all the clients bulk transferred.


It's a problem that they'll have to deal with.