Where is the industry going?

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Dec 22, 2008 9:42 pm

After reading all these new comp plans for 2009, I start to wonder on a couple of ideas.



1. Is this just a over reaction to the issues going on in the financial markets(i.e. bank debt, bad loans, lack of revenue/profits, big write downs) Or is it something else



2. With all of these decreases in comp plans doesn't that open up the market for indy advisors. With wire/bank advisors needing to focus on larger accounts(soon $250K will be the new min. acct size) won't that open up the market for small indy shops/regionals



3. Wouldn't someone who just got let go from a wirehouse be in an excellent position to start over(maybe with some assets) and be in a great asset gathering position(especially in this market) at an indy shop/regional?





Dec 22, 2008 9:45 pm

No, yes, yes.

Dec 22, 2008 9:58 pm
Cowboy93:

No, yes, yes.



+1

Dec 22, 2008 10:07 pm

I'm filling out my paperwork at this very moment.  By this time next week, I'll have declared independence, compete with an enumeration of grievances against the king.

Dec 22, 2008 10:12 pm

Will an overload of indys cause b/ds to be the next wirehouses?

Dec 22, 2008 10:15 pm
Bodysurf:

I'm filling out my paperwork at this very moment.  By this time next week, I'll have declared independence, compete with an enumeration of grievances against the king.


Frankly I can't understand why more haven't declared their independece and rebeled against the king. Truly this year has demonstrated just how little representation the average broker has with their wirehouse.


 
Every month I get my subscription of RR & read about these guys transferring from wirehouse A to wirehouse B...and it is pretty apparent in this environment that most are doing it only for the check. Makes you wonder if they will regret those moves down the road because there are so few decent broker/dealer options remaining out there.
Dec 22, 2008 10:21 pm
chief123:
With all of these decreases in comp plans doesn't that open up the market for indy advisors. With wire/bank advisors needing to focus on larger accounts(soon $250K will be the new min. acct size) won't that open up the market for small indy shops/regionals

 
As an indy advisor, my mouth waters over the $100k-$250k sized accounts.  Nobody seems to care much about them, and there are a ton of people with old 401k's or unconsolidated accounts of this value.
 
Depending on the product/strategy, I'm making anywhere from $1,000-$8,000+ initially on these accounts.  I love it.
 
Case in point:  Got an in-bound lead, a couple transferred in about $80k.  The IRA's went into VA's, the brokerage accounts went into mutual funds, and wrote life insurance policies on both of them.  A one hour meeting and half hour worth of paperwork generated $4,800 in upfront commission and will generate about $1,000 in recurring revenue every year after.
 
These kinds of clients help in the slow months while looking for the $500k clients.
Dec 22, 2008 10:26 pm
snaggletooth:
chief123:
With all of these decreases in comp plans doesn't that open up the market for indy advisors. With wire/bank advisors needing to focus on larger accounts(soon $250K will be the new min. acct size) won't that open up the market for small indy shops/regionals

 
As an indy advisor, my mouth waters over the $100k-$250k sized accounts.  Nobody seems to care much about them, and there are a ton of people with old 401k's or unconsolidated accounts of this value.
 
Depending on the product/strategy, I'm making anywhere from $1,000-$8,000+ initially on these accounts.  I love it.
 
Case in point:  Got an in-bound lead, a couple transferred in about $80k.  The IRA's went into VA's, the brokerage accounts went into mutual funds, and wrote life insurance policies on both of them.  A one hour meeting and half hour worth of paperwork generated $4,800 in upfront commission and will generate about $1,000 in recurring revenue every year after.
 
These kinds of clients help in the slow months while looking for the $500k clients.



I agree wholeheartedly...case in point a recent client that has 50k with me is rolling over a 500k 401k

Dec 22, 2008 10:36 pm

I think the wirehouse squeeze describe above will force/nudge FAs that want to work with "regular folk" to the indy side...anecdotes above are perfect examples.  Wire FAs can't make squat on those $80k accounts, so it makes perfect sense for a self employed, high marginal payout FA to take care of them.  And that will become the 500k account client at the rate the wires are moving.

Dec 22, 2008 10:41 pm

I agree also, I run $25 million with average account size of $180K.. mostly in fee based and alternative investments. Essentially I am getting about 1.15% on all assets so gross $287K with an above average payout.



It seems that this is the most logical way to go. I have around 125 clients and don't really need any more other than to cover dips in markets and clients dying..

Dec 23, 2008 1:35 pm
chief123:

I have around 125 clients and don't really need any more other than to cover dips in markets and clients dying..

 
Don't let Bob Sugar hear you say that!
Dec 23, 2008 3:06 pm

 what about the hybrid model of having wirehouse/banks provide a structure for reps to go indy under there umbrella?

Dec 23, 2008 3:08 pm
Vin Diesel:

what about the hybrid model of having wirehouse/banks provide a structure for reps to go indy under there umbrella?







No benefit to the wire/bank. Less $$$ for them, same regulatory problem, easier to transition book away.

Dec 23, 2008 5:22 pm
chief123:
Vin Diesel:

 what about the hybrid model of having wirehouse/banks provide a structure for reps to go indy under there umbrella?




No benefit to the wire/bank. Less $$$ for them, same regulatory problem, easier to transition book away.

 
they wouldnt pay the rep the same full indy payout(say 55-70%), and its better for firms to keep good reps. it gives the rep a chance to go quasi indy without disrupting his book. i think this will be the future model...
Dec 23, 2008 6:54 pm

Has anyone thought there might be a capacity issue (as in over capacity) in our industry?  Allot of the profits generated by financial firms was done through the use of extreme leverage- this created excess capacity....Kinda like when everyone was a real estate speculator over the last 5 years (we now have 12 Myn excess housing units), or when the Asian Miracle blew up in 1998 (Thailand was building excess highways and bridges)...In fact, all instances of excessive leverage have resulted in excess capacity.  The new grids, etc., are simply dealing with the reality that most brokerage sales forces (advisors) must shrink.  There will be lots pushed to independant shops, but a good portion of those won't be able to control costs and run a business resulting in failure.  The bottom line is that there are sufficient advisors to handle the current and projected growth of wealth for some time to come.  Demand will eventually pick up the slack, but not for awhile.

 
In the long run, this is all good for the survivors.
Dec 24, 2008 12:39 pm

Snaggle:  You're not the only one who salivates over $100-$250k accounts, those are perfect accounts.

 
I think the industry has to change.  If you do $500k in production, what in the hell are you getting for the $300k you send to the home office.  Research?  Seriously, what are you getting for your $300k.
 
I don't work for but have considered RJFS....they have what they call advisor choice, let the FA choose their business model.  Very forward thinking.  The firm I work for is rolling out a pilot version of this, kind of like what WS and RJFS have...
 
Personally, I'd like to see an ala carte model.  Give me a 100% payout and I'll pay for the services I use; office, technology, phone, assistant, research, back office...
Dec 24, 2008 2:09 pm

at a good bank you at least get leads for the haircuts.  at a wirehouse you get nothing.  i feel that at the bank brokerage, you pay for you leads this way.  when i was at a wirehouse i used to pay for cold calling lists, and back then would have love to pay a little more to have someone give me warm handoffs all day.  at a wirehouse you get crappy research, for the most part, and you get a tarnished name nowadays.   that is not worth 60% of you production.  it would be better spent yourself doing advertising and branding of your own.   i cant see why anyone would be at a wirehouse now.  bank brokerage and indi's seem the better options by far and the wave of the future.

Dec 24, 2008 4:37 pm
bjacobus:

Personally, I'd like to see an ala carte model.  Give me a 100% payout and I'll pay for the services I use; office, technology, phone, assistant, research, back office...


It's available for the choosing right now, bjacobus. 

Dec 24, 2008 7:10 pm

Phan2om,

 
That post is right on the mark....The industry is going to go through a deep cleansing by weeding out the brokers that are under-producing the level they should be at.  Rather than firing brokers, the firms are adjusting the grids downward, not only because they are greedy thieves, but to force out the slackers by starving them to poverty.  The same thing is happening to the realtors in the country right now. The survivors will get stronger by the way of book distribution. There will definitely be less reg reps working 12 months from now.  I can quickly think of 4 or 5 in my office of 30+ that are close to being booted as I type this. 
Dec 26, 2008 11:42 am

Morph, that would require a firm change....I'm hoping all the firms head that direction.