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Down the Corporate Ladder

So, you're thinking about a career in management? Think again.Although the grass may look greener on the other side of the branch office, having responsibility for an office of brokers is not for everyone. The emotional demands of the job are substantial. The liability is growing as regulators and plaintiffs' attorneys increasingly look to nail BOMs. And the financial rewards can actually be less

So, you're thinking about a career in management? Think again.

Although the grass may look greener on the other side of the branch office, having responsibility for an office of brokers is not for everyone. The emotional demands of the job are substantial. The liability is growing as regulators and plaintiffs' attorneys increasingly look to nail BOMs. And the financial rewards can actually be less than you'd get from a healthy book of business. That's why the industry is challenged in finding good management talent. Here are some of the firsthand lessons learned by former branch managers.

An Uncomfortable Coach Jim Peterson, First Union Securities, Frederick, Md.

Jim Peterson was a producing BOM with Wheat First Union Securities in Frederick, Md., for eight years until he had a realization about his career and personality in 1998.

"My fee-based business was growing with virtually no marketing, just from referrals," Peterson remembers. "I wondered what would happen if I paid attention to marketing and didn't have the distractions of recruiting, making sure the administrative assistants were happy, and all the million other management items."

Lots happened. In the year since relinquishing his management responsibilities, Peterson's fee business almost doubled. "Gee, maybe I did the management gig a little too long," he says, with a laugh.

Of course, Peterson never gave up his production number, so transitioning back into production full time was relatively painless. Despite the loss of the override he received as a manager (a percentage of the branch's profitability), Peterson says his paycheck increased because business grew so quickly.

But pay was never really a major consideration, Peterson says. He simply realized he was much more comfortable as a producer than he ever was as an administrator.

"To be totally honest, I've realized that I'm a much better player than I am a coach," Peterson says. "Typically, the way you become a branch manager is that the firm finds some young, hard-charging registered reps with clean compliance records and makes them branch managers. But I'm not sure that the set of skills that leads to good performance in one career translates over to the next."

Taking Things Personally Lee Weiss, Salomon Smith Barney, Scottsdale, Ariz.

As a 10-year manager of EF Hutton's Scottsdale, Ariz., branch, Lee Weiss was a counselor of sorts, someone who would listen to reps' concerns no matter how painfully personal.

"I found myself a problem-solver for things that had nothing to do with this business," Weiss remembers. "I was hearing things that someone in a confessional should be listening to."

Although Weiss thoroughly enjoyed his role as mentor and confidant, it was exhausting.

"If you do the [manager] job properly, it's not just a matter of unlocking the door in the morning and locking it in the evening," Weiss says. "It's getting inside of their heads and their hearts, and getting to know what makes them tick. It took a lot out of me."

Unfortunately, Weiss discovered that even the strongest personal relationships break under certain circumstances, especially when other firms are recruiting aggressively.

"They would come to me with a letter in hand, a long look on their face and say, 'Lee, I have to resign, but I don't want you to take this personally.' But I always took it personally," he says.

And when EF Hutton pled guilty to 2,000 counts of mail fraud during the check-kiting scandal of 1985, defections were inevitable. "That was the low point of my career," Weiss says.

By the time EF Hutton sold out to Shearson in January 1988, Weiss knew change was coming. "Shearson had a more hands-on approach," he says. "And for the senior people, it seemed a little trying at times."

In mid-1989, Shearson merged the Scottsdale offices of Shearson and Hutton, and Weiss decided to ease back into production. It was a tough decision for someone who had served on Hutton's board of directors for more than three years.

Still, Weiss says the handful of clients he had kept were eager to send referrals his way, and former clients also came back. "A lot of people were very happy to hear that I had gone back into production," says Weiss, now a senior vice president of investments and senior portfolio manager in the Scottsdale office of Salomon Smith Barney--the same office he managed for Hutton.

Weiss advises brokers moving into management to consider the price they'll pay. "If their reasons are right--they want to go up the corporate ladder into divisional or regional management--that's fine," he says. "But they shouldn't do it at the expense of their families. You just see too many situations where brokers are climbing the corporate ladder and suddenly find themselves with no family, yearning for the lifestyle they once had."

Dealing With Independence Kevin Murphy, Piper Jaffray, Casper, Wyo.

To put it politely, stockbrokers are an independent bunch, says Kevin Murphy, former manager of the Piper Jaffray branch office in Casper, Wyo. If there are 10 brokers in the office, there are 10 different franchises and 10 different styles, he says. And that was frustrating.

"Unlike a manager in another business in which you're trying to bring the team together, it doesn't really benefit one broker here if another broker does well," Murphy says.

Named one of Registered Representative's Outstanding Brokers in 1999, Murphy was a producer with Dain Bosworth before joining Piper Jaffray in 1994 as manager of the firm's new Casper branch.

On top of their independence, brokers are also fiercely protective of their own individual investment styles, Murphy says. They didn't always embrace his conservative buy-and-hold philosophy. "You have to let them be their own broker," he says. "And it's hard to mold them like you want to because you need that creativity in the office."

Murphy also discovered that his production numbers caused resentment among the rank-and-file reps. "You get the concern, 'Is he thinking more about his book than mine?'" he says.

But overall, Murphy mainly remembers the liability that went along with managing a team of registered reps and their assistants. Compliance caused major headaches, he says. "The paper jungle is just overwhelming," Murphy says.

When he left management after five years and returned to production in 1998, it was as if the weight of the world was lifted off his shoulders, he says.

"Getting out of management has really helped my production and my state of mind," Murphy says. "I've talked to a lot of people who've gotten out of management and back into production, and I have not met one person who has regretted it."

More firms are moving away from producing managers. Here's a rundown of where some wirehouses stand on the issue:

First Union Securities--The firm allows BOMs in smaller branches to produce, according to a branch manager who asked to remain anonymous. There are probably more producing managers than nonproducing managers in the firm, he says. A spokesperson declined to comment.

Merrill Lynch--Most managers of large branches (50 or more brokers) are resident vice presidents and do not produce, says spokesperson Kate Hynes. But many BOMs in smaller offices are producers, she says. Managers in small branches report to the manager of a larger branch office in the region.

PaineWebber--"The vast majority of PaineWebber's branch managers are full-time [nonproducing] managers," says spokesperson Paul Thomas. The firm feels nonproducing managers are in a better position to attract and retain experienced reps. "We expect the percentage of producing branch managers at PaineWebber to decline over time," Thomas says.

Prudential Securities--Prudential has about 40 producing BOMs, says spokesperson Susan Atran. While the firm has no official policy, it is "not particularly encouraging" managers to produce. "Given their administrative and managerial responsibilities, it's just not practical," Atran says.

Salomon Smith Barney--SSB encourages BOMs to maintain a modest production level (it caps production at 100,000 dollars), according to Scotty King, director of resource development. Producing managers are more common in small branches, where there are no production caps, King says.

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