BofA will cut Merrill Comp
Attn all Merrill Brokers:
Did you see Ken Lewis on 60 minutes tell you that you were making too much money and that he was going to bring it "in line" with bank comp? You may enjoy a quasi independent status outside the bank and enjoy 25% less pay because you a with the "best brand in the world".... You will enjoy annualized comp and all stock bonuses. You will enjoy many other colleagues getting their mits all over your book. You will absolutely love the beauracracy of a Pentagon sized corp that is now partly owned by the Govt. I am betting you love it so much you go Independent and you better do that before you sign that lovely non compete.Old mother hen, what will this do to the comp packages of the old school options traders? How will they get paid for delivering financial advice and service?
BofA will just do what WS did...slowly boil the frog. They won't do anything too drastic in the near term. They'll give MER brokers something and then leave them alone for a while.
Gracias,
consideren seriamente la posibilidad de bull Merrill.[quote=daytradah]Attn all Merrill Brokers:
Did you see Ken Lewis on 60 minutes tell you that you were making too much money and that he was going to bring it "in line" with bank comp? You may enjoy a quasi independent status outside the bank and enjoy 25% less pay because you a with the "best brand in the world".... You will enjoy annualized comp and all stock bonuses. You will enjoy many other colleagues getting their mits all over your book. You will absolutely love the beauracracy of a Pentagon sized corp that is now partly owned by the Govt. I am betting you love it so much you go Independent and you better do that before you sign that lovely non compete.[/quote] Thanks, just a few more things.... Who will when the election ? Who will win the Super Bowl ? What will the Dow do in the next 5 years ? When can we expect a cure for cancer ?[quote=rocky][quote=daytradah]Attn all Merrill Brokers:
Did you see Ken Lewis on 60 minutes tell you that you were making too much money and that he was going to bring it "in line" with bank comp? You may enjoy a quasi independent status outside the bank and enjoy 25% less pay because you a with the "best brand in the world".... You will enjoy annualized comp and all stock bonuses. You will enjoy many other colleagues getting their mits all over your book. You will absolutely love the beauracracy of a Pentagon sized corp that is now partly owned by the Govt. I am betting you love it so much you go Independent and you better do that before you sign that lovely non compete.[/quote] Thanks, just a few more things.... Who will when the election ? Who will win the Super Bowl ? What will the Dow do in the next 5 years ? When can we expect a cure for cancer ? [/quote] Here goes nothing: Barack Obama Pittsburgh Steelers 13,000 YesRecruiters are going after the Merrill sales force. With MER stock down so much, they are not losing much deferred comp to transfer to another firm. If BAC does not want to give the reps a competitive payout, the best ones will move to a firm where they can get paid or go indy.
I have to let you guys know as someone on the other side of the fence that BAC will NEVER, and I mean NEVER at any point integrate another financial company of any kind without screwing it up and creating massive red tape for all parties involved. They nearly destroyed Schwab in the 80s. The bank side employees all resented the brokerage guys and saw them as overpaid divas. They referred to their customers as holding "Slob accounts."
How do I know this? I worked on the bank side at BAC when beginning my career before getting licensed. I can tell you that not only did I never once in my entire time there referred a single client to a BAC Investment rep (instead creating an index card for my own next gig…), neither did a single one of my colleagues in the department I was in. As I inquired of other more senior employees on how to get into the investment wing, you’d be surprised at how many were not even aware that one existed!
Trust me when I say that Merrill Lynch will be seen as an overly expensive third wheel at BAC, the clients of which will be picked over by every other wing of the bank for lending and deposit based products, if not securities as well.
[quote=illinoisrep]Recruiters are going after the Merrill sales force. With MER stock down so much, they are not losing much deferred comp to transfer to another firm. If BAC does not want to give the reps a competitive payout, the best ones will move to a firm where they can get paid or go indy. [/quote]
Recruiters are all over the place. You don’t know HOW annoying it is to get ahold of a broker who has just been contacted by a bunch of idiots from MJ and MkKay or the other recruiting mouse houses out there. I swear to god they have to be using scripts and have absoloutley no idea what “trailing 12” or “AUM” means.
These people give the real, good recruiters a bad name and make our job that much harder.
I am a ML FA and I can honestly tell you that I am getting no fewer than five calls per day. Two competing Smith Barney branches call nearly every day, one guy saying their branch is better than the other (I’m not joking). Wachovia even called last week…why would I go from one place in the news to another place in the news? Where were these guys last month? Anybody thinking of leaving should have done his/her due diligence weeks ago. I’m staying, because there’s no better place for my business and I’m probably looking at a low six-figure retention bonus which is plenty for me to stay in the same seat I was going to be in anyhow. The place will be different but it will still be the leading wealth management wirehouse in the world. The indy route is tempting but I need more time to get that set up.
Good decision. There is, and will always be, a reason why the big hitters are always with the wirehouses. The Indy channel is not a long term solution. Within a matter of years there will be a few major firms, owned by banks, and they will have close to 100% of the business. The Indy channel will be put down with massive advertising asking investors where they feel more comfortable when it comes to financial advice--a bank or Bob's Carpet Cleaning and Finiancial Advisors? The entire industry is ripe for reorganizing. If you're at a premier firm now---STAY THERE and be glad you've already arrived at what will most likely be the only place in five years.I am a ML FA and I can honestly tell you that I am getting no fewer than five calls per day. Two competing Smith Barney branches call nearly every day, one guy saying their branch is better than the other (I’m not joking). Wachovia even called last week…why would I go from one place in the news to another place in the news? Where were these guys last month? Anybody thinking of leaving should have done his/her due diligence weeks ago. I’m staying, because there’s no better place for my business and I’m probably looking at a low six-figure retention bonus which is plenty for me to stay in the same seat I was going to be in anyhow. The place will be different but it will still be the leading wealth management wirehouse in the world. The indy route is tempting but I need more time to get that set up.
And surely investors will be receptive to marketing campaigns by big banks, right? Everyone loves banks, right up there with attorneys and the IRS. I am not indy but I think that avenue is exploding in growth as we speak. I saw today that a ML team with 900 million AUM left to go indy within the last week.
Good decision. There is, and will always be, a reason why the big hitters are always with the wirehouses. The Indy channel is not a long term solution. Within a matter of years there will be a few major firms, owned by banks, and they will have close to 100% of the business. The Indy channel will be put down with massive advertising asking investors where they feel more comfortable when it comes to financial advice--a bank or Bob's Carpet Cleaning and Finiancial Advisors? The entire industry is ripe for reorganizing. If you're at a premier firm now---STAY THERE and be glad you've already arrived at what will most likely be the only place in five years.[/quote] "If you're at a premier firm now" What the heck are you talking about? Which one is premier, they all went bankrupt or needed a govt or foreign bailout to avoid being bankrupt. Wish it was not the case, but it is what it is, all these places are taranished nearly beyond repair, 2009 earnings will show this clearly.[quote=cubfan1404]I am a ML FA and I can honestly tell you that I am getting no fewer than five calls per day. Two competing Smith Barney branches call nearly every day, one guy saying their branch is better than the other (I’m not joking). Wachovia even called last week…why would I go from one place in the news to another place in the news? Where were these guys last month? Anybody thinking of leaving should have done his/her due diligence weeks ago. I’m staying, because there’s no better place for my business and I’m probably looking at a low six-figure retention bonus which is plenty for me to stay in the same seat I was going to be in anyhow. The place will be different but it will still be the leading wealth management wirehouse in the world. The indy route is tempting but I need more time to get that set up.
I sort of doubt your comment about wirehouses vs. indies. I think there has been no better time to be indy. Now, I agree that the one-man-band LPL guy will never compete for the big money. But there are more and more wirehouse teams creating their own wealth management firms and doing it right. And it seems to me that it is becoming more and more appealing to investors to go that route rather than risk it with the big bank houses. Unfortunately, the investment banks’ greed have killed it for the wealth management divisions. The other advantage is that many of these wealth management firms can now become more focused and re-brand themselves based on what client base they want to target, rather than just being known as the Dorfman-Peters team at Citi Smith Barney, or the DFGY Wealth Management Team at Bank of America Merrill Lynch, or the Dream Team at AGE Wachovia Wells Fargo Asset Management, or the ABC Team at Morgan Stanley Okinawa Bank NA.
Branding has become/will become a bigger issue than most think.
[quote=Gordon Gekko]
And surely investors will be receptive to marketing campaigns by big
banks, right? Everyone loves banks, right up there with attorneys and
the IRS. I am not indy but I think that avenue is exploding in growth
as we speak. I saw today that a ML team with 900 million AUM left to go
indy within the last week.
[/quote]
There are very few Indy practices with 900 million AUM.
Additionally, even 900 million can leave. Nothing is cast in
stone.
You’re naive beyond belief if you don’t believe that Bank of
America–who already does business with 50% of the nation, could not
suck 900 million out of an indy shop if they want to.
One of the biggest mistakes any sales person makes is to conclude that
their relationship with any given client is bullet proof. I’ve
seen parents transfer their account away from a child–I’m aware of
wives who will simply not do business with their husband’s firm
and on and on.
The concept of the Indy producer becomes particularly suspect when the
markets are volatile. The 900 million dollar Merrill team that
left will come to realize that a portion—perhaps a large portion–of
those AUM will become uncomfortable and decide that Bank of America
would be a better fit.
The reality is that we all like to complain about banks , but when push
comes to shove they’re going to win most of our business.
As this financial disaster unfolds investors are going to be made more
and more aware of the various tiers–the caste system–among their
sources of investment advice, custodianship and so forth.
There is no way in hell that an outfit called LPL Fiinancial Services
will be able to stand up when the client is considering them or Bank of
America.
You know I’m right. You hate to hear it, but you know I’m right.
Your crystal ball is awesome, pal! By the way, the markets are volatile now (check the VIX out) and the trend is towards the indy platform. Beyond that, I am not as clarevoyant as you looking out years down the road. Who will win the election by the way, Mr. Right?
LPL is looking pretty good right now from my clients’ perspectives. No Investment banking, no investment inventory, no proprietary products, SIPC insurance (+ Lloyds of London insurance up to $99.5 million per account), Insured Cash Account up to $1 Million, FDIC Bank CDs, Fixed Products and Variable annuities.
I know what you’re getting at Put, but I think given the right marketing campaign, Indies can compete quite easily.
My point is that the dynamics have changed–dramatically.
Investors are nervous as a whore in church and will naturally gravitate
to the household names.
Jones Mufflers and Financial Advice is meaningless. I have a
buddy who is Indy. I’ve been with him several times when he
introduces himself as being with Acme Financial Advisors, we’re
associated with Raymond James Financial Services hoping to glom
onto the RJ name.
I haven’t asked him recently, but I’ll be a dollar to a donut that the
prospect are saying, "Did you say you work for Raymond James,"
which they’re wondering because they know the name.
It’s actually as meaningless as Joe The Plumber saying, “I have an
account at Bank of America” in an attempt to build credibility.
[quote=gvf]
LPL is looking pretty good right now from my clients’
perspectives. No Investment banking, no investment inventory, no
proprietary products, SIPC insurance (+ Lloyds of London insurance up
to $99.5 million per account), Insured Cash Account up to $1 Million,
FDIC Bank CDs, Fixed Products and Variable annuities.
I know what you’re getting at Put, but I think given the right marketing campaign, Indies can compete quite easily.
[/quote]
Does LPL or RJFS or any of the others have the warchest to compete with Bank of America?
I must be naive but I thought clients did business with individuals via referrals. Silly me!
[quote=Gordon Gekko]
I must be naive but I thought clients did business with individuals via referrals. Silly me!
[/quote]During a roarinig bull market. When investors lose 40% of their
equity they are nobody’s friend and tend to seek shelter in the big
names.
There is an assumption–erroneous, but there–that a firm like Merrill would not hire a dumb ass.
I sort of agree with you, PP. Working at WS, I heard the freakouts going on at the other side of the phone when talking about the future of Wachovia. ML is still the daddy, I just think that big banks can’t totally kill the entreprenurial spirit that advisors have and that indy reps really seem to have. Again, I work at WS/prior AGE. Ken Lewis is so full of crap. He didn’t say anything about his pay voluntarily going down. Having worked at NationsBank, I would not want to be heading back into that abyss.
I think you’re missing Gordon’s point.
When you sit down with a prospect that was referred to you, they tend to build the relationship with the individual broker versus the brand on your business card. The most successful books are built on personal relationships. Not many BEST clients will come to you based on the shingle on your door, maybe a few but you will never build a book of these based on "who" you work for.[quote=Gordon Gekko]I sort of agree with you, PP. Working at WS, I
heard the freakouts going on at the other side of the phone when
talking about the future of Wachovia. ML is still the daddy, I just
think that big banks can’t totally kill the entreprenurial spirit that
advisors have and that indy reps really seem to have. Again, I work at
WS/prior AGE. Ken Lewis is so full of crap. He didn’t say anything
about his pay voluntarily going down. Having worked at NationsBank, I
would not want to be heading back into that abyss. [/quote]
Ken Lewis’ compensation is irrelevant. He’s the boss and what he wants to do to you matters, you can do nothing to him.
Banks are notoriously conservative, both in their practices and in
their rank and file compensation. There are going to be wealth
management types and trust officers whose voices will be heard—and
what they’re going to be saying is that they want to be paid as much as
a wirehouse broker–or they want the wirehouse brokers to be paid as
little as they are.
The latter argument will win.
I guess you don't see the craziness of your statements given the mess we are in. Conservative? Like leverage and derivatives they don't even understand?
And I would say Lewis' comp is totally relevant because it undermines the BS he spews on 60 Minutes.[quote=Broker Fee]I think you’re missing Gordon’s point.
When you sit down with a prospect that was referred to you, they tend to build the relationship with the individual broker versus the brand on your business card. The most successful books are built on personal relationships. Not many BEST clients will come to you based on the shingle on your door, maybe a few but you will never build a book of these based on "who" you work for. [/quote]I understand and would have agreed with you last year. But what has happened changes the entire landscape.
It's irrational, but people do not make rational decisions when under stress. Every account in the investment universe is now in play--certainly every retail account--but even institutional players are wondering about the quality of the executions they're getting.
The guy or gal who has as many, "There ain't nobody better or bigger" in their column is going to win.
I suggest that many of you guys are too close to the epicenter to be impartial, and that, to a degree, you're whistling past the graveyard.
I suggest your hubris is leading you to make predictions that nobody knows at this point. But hey, I don't have that crystal ball that you have.
I don’t think the brand name helps you in this market. Maybe in past markets when it wasn’t the “Financial Sector” that caused all the problems, not to mention clients who got stuck with ARS(I swear they are liquid and like cash)… Brand name won’t help anyone now, because it’s that same brand name that is being flashed across the news saying how they didn’t know what was happening(Wachovia $24 Billion in losses)
Would a bank be interested in buying EJones? I’ve heard that one reason EJ wants to grow is to avoid being bought. (Or maybe the GPs are trying to grow to make themselves more attractive)?
[quote=Gordon Gekko]
I suggest your hubris is leading you to make
predictions that nobody knows at this point. But hey, I don’t have that
crystal ball that you have.
The coming year is going to be the most stressful in retail brokerage since the 1970s.
There is no reason to know this little stat, but it’s a fact that there
are almost no people in their sixties who work for, or worked for, a
Wall Street firm as a retail broker.
The reason is because they would have been in their late 20s and
thirties back in the 1968 to 1982 malaise period and they just gave up
and went to work at places like IBM and NCR.
I got registered in 1972. Nobody in my training class of 31 was
still in production in 1982. I am not unusual in that
experience. By the time the market turned up in 1982 a twenty
broker office might have three or four people–almost all of them older
guys who have died by now or are drooling in some place.
As the market improved the desire to be a stockbroker returned to the
younger people. Some guy who was born in 1955 was 27 when the
market bottomed. If he had a resume that catches the eye he was
offered a job. If he was any good he made it, and he made it in
spades because he has enjoyed the longest bull market in history.
I know, I know–October 1987, the tech bubble, the decline after
September 11th. Those were minor downturns in an overall bull
market.
What has happened in the last couple of months is a market crash–and along with it went investor confidence.
In 1987 confidence was not lost because it came back so quickly.
The tech bubble was so obscene that only true morons got caught–JDS
Uniphase was worth more than Wal*Mart? Give me a break…
How about that sock puppet dog–whatever that company was got to be
more valuable than IBM. Nuts.
Then there was the decline after September 11th. Investor
confidence was held up because it was patriotic to be confident in
America.
But there is no patriotism in play today, there is no ridiculous tech
bubble to look back at and it is not going to bounce back in a few days
like it did in 1987.
In the 14 years from 1968 to 1982 the Dow Jones traded in a 500 point
range. As I said I got my ticket in September 1972 and lived
through it. I understand the urge for the reader to say, “Next
he’s going to talk about walking through the snow to school”–but what
you must never lose sight of is the fact that the market is cyclical
and it’s time we have another cycle like that.
There are millions and millions and millions of investors who have watched billions of dollars worth of equity simply evaporate.
I understand that the US is not going out of business, and that someday
Apple will probably trade at 190 again. But in the mean time I
also understand that there are all sorts of resistance points between
98 and 190 and it’s going to take years to get past the overhanging
supply that materializes everytime a stock advances even a little bit.
But back to today. The industry is consolidating and the banks
are the owners of the household names. Now that there’s nowhere
for a great branch manager or a million dollar producer to go
that isn’t another bank you can bet that the cuts in compensation are
coming.
The banks are not going to sit by and watch their AUM leave for the
RJFS or LPL platforms. Hell they may buy them next—Tom James is
pushing 70 and unless it’s changed hands while I wasn’t watching LPL is
owned by veture capitalists who are known for building something up and
then selling it.
Well, the chance to build it up just went up in a cloud of smoke–how long do you figure they’ll hold on to it?
Wow Put, that is very sobering…just shoot me now!
[quote=Squash]I don’t think the brand name helps you in this market.
Maybe in past markets when it wasn’t the “Financial Sector” that caused
all the problems, not to mention clients who got stuck with ARS(I swear
they are liquid and like cash)… Brand name won’t help anyone now,
because it’s that same brand name that is being flashed across the news
saying how they didn’t know what was happening(Wachovia $24 Billion in
losses)[/quote]
99.99% of the population has no idea that Wachovia has been invovled in "issues."
90% of investors don’t know it either. They hear this stuff and immediately forget it.
What they don’t forget is the fact that they see a Wachovia branch ever
two or three miles on their drive to work, the mall, the kids soccer
game and to their mistress’ apartment.
They never see LPL Financial Services unless they read a magazine aimed
at the industry. Your prospects are not reading those
magazines. We tend to believe that everybody knows this stuff
because it’s so meaningful to us.
To them what matters is “Who’s on the pole.”
[quote=buyandhold]Would a bank be interested in buying EJones? I’ve
heard that one reason EJ wants to grow is to avoid being bought. (Or
maybe the GPs are trying to grow to make themselves more attractive)?
[/quote]
Doubtful–not their business model. I happen to be in the camp
that believes that EJ is a giant opportunity that is being mismanaged,
and has been for years. In my previous life I did a lot of
committee style work with John Bachman and at that time it seemed like
EJ had an ideal business plan. I’m not sure where they went off
the tracks, and I hear all the negatives that the EJ haters have had to
say here—so please don’t repeat them.
What I can’t see is them appealing to a bank. A harsh reality is
that they don’t hire the brightest bulbs in the room and they tend to
focus on a segment of the market that is not all that lucrative.
I sort of suspect that EJ will just always be around, nibbling at the
edges, picking up the crumbs. While also being a revolving door
for brokers.
[quote=Provocative Put] [quote=Gordon Gekko]
I suggest your hubris is leading you to make predictions that nobody knows at this point. But hey, I don't have that crystal ball that you have.
[/quote]The coming year is going to be the most stressful in retail brokerage since the 1970s.
There is no reason to know this little stat, but it's a fact that there are almost no people in their sixties who work for, or worked for, a Wall Street firm as a retail broker.
The reason is because they would have been in their late 20s and thirties back in the 1968 to 1982 malaise period and they just gave up and went to work at places like IBM and NCR.
I got registered in 1972. Nobody in my training class of 31 was still in production in 1982. I am not unusual in that experience. By the time the market turned up in 1982 a twenty broker office might have three or four people--almost all of them older guys who have died by now or are drooling in some place.
As the market improved the desire to be a stockbroker returned to the younger people. Some guy who was born in 1955 was 27 when the market bottomed. If he had a resume that catches the eye he was offered a job. If he was any good he made it, and he made it in spades because he has enjoyed the longest bull market in history.
I know, I know--October 1987, the tech bubble, the decline after September 11th. Those were minor downturns in an overall bull market.
What has happened in the last couple of months is a market crash--and along with it went investor confidence.
In 1987 confidence was not lost because it came back so quickly. The tech bubble was so obscene that only true morons got caught--JDS Uniphase was worth more than Wal*Mart? Give me a break.. How about that sock puppet dog--whatever that company was got to be more valuable than IBM. Nuts.
Then there was the decline after September 11th. Investor confidence was held up because it was patriotic to be confident in America.
But there is no patriotism in play today, there is no ridiculous tech bubble to look back at and it is not going to bounce back in a few days like it did in 1987.
In the 14 years from 1968 to 1982 the Dow Jones traded in a 500 point range. As I said I got my ticket in September 1972 and lived through it. I understand the urge for the reader to say, "Next he's going to talk about walking through the snow to school"--but what you must never lose sight of is the fact that the market is cyclical and it's time we have another cycle like that.
There are millions and millions and millions of investors who have watched billions of dollars worth of equity simply evaporate.
I understand that the US is not going out of business, and that someday Apple will probably trade at 190 again. But in the mean time I also understand that there are all sorts of resistance points between 98 and 190 and it's going to take years to get past the overhanging supply that materializes everytime a stock advances even a little bit.
But back to today. The industry is consolidating and the banks are the owners of the household names. Now that there's nowhere for a great branch manager or a million dollar producer to go that isn't another bank you can bet that the cuts in compensation are coming.
The banks are not going to sit by and watch their AUM leave for the RJFS or LPL platforms. Hell they may buy them next---Tom James is pushing 70 and unless it's changed hands while I wasn't watching LPL is owned by veture capitalists who are known for building something up and then selling it.
Well, the chance to build it up just went up in a cloud of smoke--how long do you figure they'll hold on to it?
Pretty Long so maybe I lost all the points..but when looking at the chart from 72-82 can see what you are saying, I think when the dust settles here DOW 6000, 7000, 8000 we are looking a shell shocked investor for a long time, going to be brutal..You spell it out clearly, My dad started in 69 and says like you only 2-3 out of 30 in his office where there at the end of it dead period.
[/quote]
[quote=shredder]Wow Put, that is very sobering…just shoot me now![/quote]
Just always have a fall back plan, and if you can land in a premier
firm do so. It will be a safe place to wait out the storm.
If you don’t have the pedigree to be hired at a Merrill or Smith Barney
it might be best to simply cast your lot with a premier insurance
company. There are those who will tell you that there is more
opportunity at a place like MetLife than there is at Merrill.
If the goal is to make money and hold your head up high I don’t think I
could disagree. A MetLife guy won’t have the same arsenal of
tricks to serve the clients–but the reality is that most people
shouldn’t be doing more than the basics.
At the end of the day about 90% of us really do need little more
than some more term insurance and a good quality mutual fund family.
Fritz, are you working in the Raleigh area?
What would you do if you were at Jones and had an offer on the table from Merrill?
No, but your scenario played out here in the West also, growing up would listen to my dad tell me the stories about how impossible the business was in the 70's. He has been retired for 10 years or so, said the same thing as you recently, most all the guys he worked with are dead. Stress and back then allowed smoking in the office said killed them all early. I am not as sure about you how this is going to play out, but do think the business is changing in a major way. Maybe only top 10% make it, but I see the banks from the little I know from guys who have gone that route, they do not think the broker is an important part of the wheel, couple of my buddies doing 7 figures there get balls busted and threatened to be replaced several times a year for not sucking up to branch managers etc..in fact one guy has been switched to 4 branches this year and now has a 75 minute commute daily and his t-12 is 1.2MM. Just dont see how this is going to a smooth deal with banks maybe now calling the shots. Also he has been told to expect the grid to go to 25% sometime next year at Wells.Fritz, are you working in the Raleigh area?
[quote=Borker Boy]What would you do if you were at Jones and had an offer on the table from Merrill?[/quote]
Let me see…what would you do?
[quote=Provocative Put]
Good decision. There is, and will always be, a reason why the big hitters are always with the wirehouses. The Indy channel is not a long term solution. Within a matter of years there will be a few major firms, owned by banks, and they will have close to 100% of the business. The Indy channel will be put down with massive advertising asking investors where they feel more comfortable when it comes to financial advice--a bank or Bob's Carpet Cleaning and Finiancial Advisors? The entire industry is ripe for reorganizing. If you're at a premier firm now---STAY THERE and be glad you've already arrived at what will most likely be the only place in five years.[/quote]Oh Putsy, please share more stories with us about the good old 70s days, and how you have magically gained special insight into the future of the industry now that you are out of the business. Let's see if I have this right - biggest firm possible, good! Clients crave old reliable brand names. They don't care if they are all going out of business or being swallowed up or bailed out. They don't care about their advisor, just the brand name. Very exciting stuff!! I can't write this down fast enough!
Could you also lend me your 8 track player?! My records all have scratches in them, and my old 78 Victrolla is on the fritz. Do you think I should spring for a color TV too?
Please write more soon. Your current pace of 25 posts an hour is just not enough for me!!
[quote=Morphius]
Please write more soon. Your current pace of 25 posts an hour is just not enough for me!!
[/quote]
Well, as much as I’d like to write a long meaningful piece I’ll have to
cut this short. It’s 11:15 in the East and my beast knows we’re
supposed to go for a walk between 11 and 11:30.
What I said, child, is that in a time of crisis it is human nature to look for strength.
They are not going to find it with Morphius Brake Repair and Financial Advisory in Bumphuck.
They’re going to be drawn to the household names.
Put yourself in the mind of a client. Would you trust you more than a real advisor at a real firm?
We’re talking about Bank of America–who already has a relationship
with 50% of the familiies in the country. We’re talking about
Wells Fargo–a mega bank holding company, not the stagecoach
company. We’re talking about Citibank.
You’re a fool if you think your clients are not wondering if they’ve
made a mistake by dealing with you. The good news is that some
other guy’s clients are wondering if they made a mistake with him so
you may be able to pick off some of his business–but people are funny
about their money and the days of taking a flyer with some unknown name
instead of a major player are over.
Guys with your refusal to acknowlege reality are dead men
walking. I suspect the industry will be better when you’re
gone.
Now I’m off with the beast. I’ll give him your best.
[quote=Provocative Put]
There is an assumption–erroneous, but there–that a firm like Merrill would not hire a dumb ass.
[/quote]
And then there are folks such as yourself who prove that assumption to be wrong every time they open their mouths…
That may play in the big city, but it's a long way from reality in my little version of "Bumphuck". This week, I picked up two accounts approaching a million dollars...one from Merrill and one from Edward Jones. Both were shared clients who felt like they weren't getting adequate service and response from brand X and decided that they liked how their independent advisor did business with them. Your analysis of why we'll all be bank brokers is flawed to say the least. What you fail to realize is that independent B/D's don't hold nearly the control over their advisors that traditional captive B/D's do. Sure, it's possible that banks may purchase independent B/D's, they still will not possess that critical employer-employee relationship that they like to use to exert control and cut costs. If they try to act like an employer with a group of independents, they'll end up with a whole lot of nothing. Independent brokers will simply move to another more independent B/D or even form an alliance and start a new independent B/D. It hasn't been that long ago that someone similarly supposed that bank mergers would continue until there were only a few megabanks. This is continually proven false as small de novo community banks are springing up all around me in response to mega-mergers, higher fees and reduced service. I'll submit that there will always be a place for the independent advisor and boutique firms that are long on service and reputation. I've lost exactly one client over the last two years...three if you count death and distribution. I've gained many more than that just at the expense of other large firm advisors and I haven't solicited the first transfer. You can choose to believe that or not. I certainly don't see it as the least bit implausible as I've been living the experience. More than the firm, people in my neighborhood are looking for an advisor with experience. As long as the firm has adequate SIPC coverage and execute, the Bumphuckians couldn't care less about who I choose to work for and a few are even glad I'm not associated with a large Wall Street firm.Well, as much as I’d like to write a long meaningful piece I’ll have to cut this short. It’s 11:15 in the East and my beast knows we’re supposed to go for a walk between 11 and 11:30.
What I said, child, is that in a time of crisis it is human nature to look for strength.
They are not going to find it with Morphius Brake Repair and Financial Advisory in Bumphuck.
They’re going to be drawn to the household names.
Put yourself in the mind of a client. Would you trust you more than a real advisor at a real firm?
We’re talking about Bank of America–who already has a relationship with 50% of the familiies in the country. We’re talking about Wells Fargo–a mega bank holding company, not the stagecoach company. We’re talking about Citibank.
You’re a fool if you think your clients are not wondering if they’ve made a mistake by dealing with you. The good news is that some other guy’s clients are wondering if they made a mistake with him so you may be able to pick off some of his business–but people are funny about their money and the days of taking a flyer with some unknown name instead of a major player are over.
Guys with your refusal to acknowlege reality are dead men walking. I suspect the industry will be better when you’re gone.
Now I’m off with the beast. I’ll give him your best.
Nothing but bank brokers?? He was kidding right? I pick up more clients from “BIG NAME POLE IN THE SKY” Banks than I do from other sources. Mainly because the broker at the bank switches every 6 months to a year. Last client brought in some statements, different advisor name every statement.
The problem with banks is that they want to do everthing: Mortgages, Credit Cards, Accounts, Brokerage, Investment Banking… but they always fall short in just about everything. The reason is once they find people who can do their job, they promote them and bring in some more people who can’t. It ends up being a cycle that repeats itself.
Putsy,
Your ramblings about household names and everyone wanting to work with megabanks is so far out of touch with reality that it is amazing. If you think now of all times that people want to put their trust in the big megabanks - the same ones that they wake up every morning wondering if today might be the day their so-called strong, safe megabank is gobbled up, closed down or bailed out - then you are the one who doesn’t recognize reality.
But I guess it’s hard to stay in touch with reality in an industry you don’t even work in any more.
I work at a firm owned by “one of the megabanks”. Believe me when i tell you that i and the other FA;s in my branch are always being asked questions by our clients about the bank and how their accounts are protected - Insurance, SIPC, Lloyds, etc. They are all worried. To the point where we need to have branch meetings to discuss how to answer the questions.
There is a whole site on our intranet on “answering client concerns” and "how clients accounts are protected"
There is no doubt in my mind, that if i were to make a move (which i am not planning to do at this time) to RIA, and told clients their accounts would be held at Schwab, or if i went Indie, and explained that LPL has no bad loans on their books, or subprime or derivatives, or investment banking, or any other skeletons in their closet, they wouldnt think for one second about leaving the “cozy warm and fuzzy” big ass bank daddy.
Putsy, all due respect to your years of experience, but you are off on this one, Morphius hit it on the head.
[quote=Provocative Put]
[quote=Gordon Gekko]
I must be naive but I thought clients did business with individuals via referrals. Silly me!
[/quote]During a roarinig bull market. When investors lose 40% of their
equity they are nobody’s friend and tend to seek shelter in the big
names.
There is an assumption–erroneous, but there–that a firm like Merrill would not hire a dumb ass.
[/quote]
Actually, they do and will. Do you really think all 16,000+ brokers are smart guys? Not a chance. Merrill does a great job of snowballing their employees, doing the old carrot-on-a-stick routine and generally brainwashing everyone they can. You can’t do those things to intelligent guys.
Just my opinion, but I talk to these guys everyday and from my vantage point it appears that the majority of them are clueless.
[quote=Indyone]
That may play in the big city, but it's a long way from reality in my little version of "Bumphuck". This week, I picked up two accounts approaching a million dollars...one from Merrill and one from Edward Jones. Both were shared clients who felt like they weren't getting adequate service and response from brand X and decided that they liked how their independent advisor did business with them. Your analysis of why we'll all be bank brokers is flawed to say the least. What you fail to realize is that independent B/D's don't hold nearly the control over their advisors that traditional captive B/D's do. Sure, it's possible that banks may purchase independent B/D's, they still will not possess that critical employer-employee relationship that they like to use to exert control and cut costs. If they try to act like an employer with a group of independents, they'll end up with a whole lot of nothing. Independent brokers will simply move to another more independent B/D or even form an alliance and start a new independent B/D. It hasn't been that long ago that someone similarly supposed that bank mergers would continue until there were only a few megabanks. This is continually proven false as small de novo community banks are springing up all around me in response to mega-mergers, higher fees and reduced service. I'll submit that there will always be a place for the independent advisor and boutique firms that are long on service and reputation. I've lost exactly one client over the last two years...three if you count death and distribution. I've gained many more than that just at the expense of other large firm advisors and I haven't solicited the first transfer. You can choose to believe that or not. I certainly don't see it as the least bit implausible as I've been living the experience. More than the firm, people in my neighborhood are looking for an advisor with experience. As long as the firm has adequate SIPC coverage and execute, the Bumphuckians couldn't care less about who I choose to work for and a few are even glad I'm not associated with a large Wall Street firm.[/quote]How about this scenario. Bank of America buys LPL for no reason other than to buy the competitiion--a classic way of dealing with competition.
The venture capitalists who own LPL are, no doubt, disappointed with their timing and it's crazy to think venture capitalist types won't cut their losses short in a heartbeat.
It doesn't have to be B of A--it could be Wells Fargo, Citi, JP Morgan/Chase or perhaps it will be UBS--who knows.
Anyway, one day you boys and girls who clear through LPL wake up to hear that LPL is now a another division of a bank.
That bank will also own a branch network with registered people who are paid base salaries and bonuses--earned by the bank in the form of sales charges, trails and management fees on proprietary products.
If you were the senior management of the bank what would you do about the marginally trained, poorly supervised, over paid "advisors" who are clearing through your new LPL division?
First bombard the LPL clients with statement stuffers that explain what the bank is going to do for them. Explain that their local representative is sticking his fist into their account and extracting fees for advice that may or may not be worth a bucket of spit. Add that that won't be happening if they call an 800 number and ask the bank to transfer their account to one of the bank's team of registered reps with years worth of experience at places such as Merrill Lynch, AG Edwards, Smith Barney.
It will be seamless--a two minute phone call.
Next offer the LPL reps with an attractive book, compliance history and education an opportunity to join the bank alongside of the reps who were acquired when the bank bought other firms. Or leave.
Remember, the bank will have your complete client list, and what they hold. They will know the client's cost basis, how they have been doing position by position and so forth.
Are you really so cock sure of your relatiionship that you'd be willing to turn your records over to a seasoned broker at Merrill and challenge that broker to steal your accounts?
The deal is that the whole landscape has changed. A year ago there was not a client out there who didn't think that their "acvisor" was doing a very good job--the Dow as at 14,000 and everything seemed rosey.
When the Dow collapses to 8,000 in a year there is not a client alive who isn't questioning all of their decisions. High on the list--perhaps highest--is their choice of voices to listen to.
I've been around a long time. I've done what virtually everybody reading this does--it's not rocket science.
It's also exceptionally easy to pick off investors when they're running scared.
The Indy model has always been suspect. This is a very cash intensive business and firms that are being operated on a shoestring fracture at the oddest places. Heavy volume can cause horrendous back office problems. Falling markets invite fails to occur at an extraordinary clip.
Falling markets also invite causes of action at an alarming rate--if one of your clients decides that he's going to recoup his losses with the help of an attorney that attorney will name not only you but also your clearing firm in the action. That means that there are going to be exceptional legal costs simply to defend--much less to settle.
What you need to do is sit with a pad of paper and think of somthing that might happen. Draw a circle around it then think of what might happen as a result of that event , write it down and draw a circle around the first circle and the new event that might happen. Then looking at those two events try to envision a third, a fourth, a fifth event.
I have spent the bulk of my career charged with keeping track of what is happening, what motivates the various players--both the reps and the clients.
Trust me, there's a hell of a lot more to what's happening than "Well, my firm has excess SIPC coverage to 25 million so I'm not worried and neither are my clients."
If you've never been through a SIPC liquidation you don't know Jack about what you should be concerned about.
"I know my clients are happy because they don't tell me they're not." If your spouse is fooling around on you you're probably the only person who might know who doesn't.
If an attorney tells your mother, "Mrs. Jones, I know that Tom is your son--but your best chance of being made whole is to sue his firm. He will have to be sued too, but it's only a business decision you're making" she damn well may call you some evening and tell you, "Honey, you know I love you dearly---but when so much of my money was lost it ruined the rest of my life. I know you feel terrible about it, and I don't blame you. However, I have hired an attorney................"
Trust me, this schidt happens. It hasn't happened since the 1970s because a monkey with a pencil could make money since 1982.
[quote=Squash]Nothing but bank brokers?? He was kidding right? I pick
up more clients from “BIG NAME POLE IN THE SKY” Banks than I do from
other sources. Mainly because the broker at the bank switches every 6
months to a year. Last client brought in some statements, different
advisor name every statement.
The problem with banks is that they want to do everthing:
Mortgages, Credit Cards, Accounts, Brokerage, Investment Banking… but
they always fall short in just about everything. The reason is once
they find people who can do their job, they promote them and bring in
some more people who can’t. It ends up being a cycle that repeats
itself. [/quote]
I do agree with the idea that they promote people who master a
task–they also tend to promote somebody who was a good bank branch
manager to be a brokerage branch manager.
But that was BEFORE. That was when banks were trying to build
their own branches when they were allowed to. Bank of America
bought somebody–I’m thinking Quick and Reilly, but it might have been
one of the others.
It was not a good experience for them for several reasons. One of
which was the fact that Quick and Reilly was really a NYSE floor
specialist and a clearing firm that decided to open branches so that a
third son could have a division to run too.
Those branches were more penny stock boiler room than silk stocking
retail brokerage. In an attempt to make it work better the bank
started to throw bank people into the brokerage environment. Not
good, bankers are notoriously conservative, brokers are notoriously
entrepreneurial. Different cultures.
The first real effort for banks to own traditional brokerage firms was
when First Union Bank bought Bache from Prudential, Prescott Ball and
Turben from their partners and Richmond based Wheat First
Securities–a very respected name in the mid Atlantic with an
oustanding management team.
First Union executives had the sense to let brokerage professionals run
the shop. Mostly the senior people were from Wheat First and it
continued to flourish–their clearing operation became a real
competitor for Pershing and National Financial.
The retail brokerage prospered too–of course it was the bull market as
much as anything. Nothing makes a financial advisor seem smart
like a bull market.
Somewhere along the way First Union bought Wachovia and for reasons
known only to those who were making the decision First Union abandoned
its name in favor of Wachovia. I heard that the First Union name
was not good in Florida so it was decided to call the combined
operation Wachovia.
The bank was headquarted in Charlotte and the broker/dealer–running
the third largest wirehouse–was in Wheat First’s longtime offices in
Richmond.
A bit more than a year ago Wachovia grew even larger when they bought
AG Edwards–intending to move the headquarters from Richmond to St.
Louis to take advantage of all the expertise at AGE.
Then the bank–not the brokerage division–blew up.
There is no reason to think that PaineWebber is weak because it’s owned
by a bank. There is no reason to think that Smith Barney is weak
because it’s owned by a bank. There is no reason to think that Wachovia
Securities/AG Edwards is weak because it’s owned by a bank.
[quote=Morphius]Putsy,
Your ramblings about household names
and everyone wanting to work with megabanks is so far out of touch with
reality that it is amazing. If you think now of all times that
people want to put their trust in the big megabanks - the same
ones that they wake up every morning wondering if today might be the
day their so-called strong, safe megabank is gobbled up, closed down or
bailed out - then you are the one who doesn’t recognize reality.
But I guess it’s hard to stay in touch with reality in an industry you don’t even work in any more.
[/quote]
Where did I say that ANYBODY wants to work at a bank?
What my advice is is this. Within a matter of years the banks will dominate what we know as retail brokerage.
Within a matter of weeks huge numbers of clients will be filing
lawsuits and part of those suits will be advice from their attorney to
transfer their account to a bank.
It’s part of the patter when you’re an independent broker to talk about the impersonal service at a bank, blah, blah, blah.
In a bull market that resonates–but in times of stress the strength of the bank is exactly what the nervous client wants.
It’s like the Verizon ad–that goofy looking guy with the glasses is backed up by an entire team.
The Indy version is the goofy looking guy surrounded by empty space.
Talk to people who you know who are not your cients, but know what you
do. Ask them to tell you all the reasons they can think of that a
person would rather do business with you instead of Bank of
America. Don’t prime the pump–just ask them cold.
You’ll be surprised, amazed, and I dare say scared to death.
Putsy, I think that you are the king of projection. You feel a certain way, so you think that everyone else feels the same way. Your right that the banks will dominate the retail brokerage market. The question is whether the retail brokerage market will dominate the financial advice industry.
Holy crap Putsy! I couldn’t even read all your posts.
Here's one to try on for size....a few years down the road when valuations have re-energized, I think Merrill and AGE/WS/WF will take themselves independant again. I think if BOA and WF can extract enough value out, they will sell them, especially if they find out that they are not good cultural fits. One other thing to consider on the indy vs. wirehouse debate....msot indies don't need to have that many clients to make a good living. Most only need a few hundred (or less) and they are set for life. So it's hard to imagine that any indy broker could not find a few hundred people willing to do business with them over the course of time. Then it's a whole different issue with larger "wealth management" firms. I think these firms are becoming a better alternative to banks/wirehouses. It's been my experience that most people are comfortable with their cash/checking/CD's at their bank, but are not as comfortable with them handling investments. I pick up clients from banks quite often. However, I don't think clients (in general) will view Merrill Lynch or Smith Barney as "banks", even thought they are owned by them. I think AGE/WS/WF clients might be a different story, depending on how they finally decide to brand themselves.Putsy-
Are you the same guy who was singing the praises of working at premier firms like MER, C, WB…a while back? Do $24 billion losses boost the prestige of a firm according to your B/D hierarchy?
As stated by others on the board your track record and views on the state of the industry are way out there and really laughable. Your scenario of LPL being bought by a bank highlights this. These banks, wirehouses, quasi government entities have their hands full right now without bailing out venture capitalists who invested in indy broker dealers.
Putsy,
With your zeal to try and predict the future you should consider becoming a meteorologist or maybe an economist. Although they would actually expect you to base your predictions on something beyond your gut impression, so that probably wouldn’t work either.
Fortune telling maybe?
[quote=anonymous]Putsy, I think that you are the king of
projection. You feel a certain way, so you think that everyone
else feels the same way. Your right that the banks will
dominate the retail brokerage market. The question is whether the
retail brokerage market will dominate the financial advice
industry. [/quote]
Do you envision some sort of Mom and Pop franchises with store fronts
were people can stop in for some financial advice and a shoe shine?
Willie Sutton is said to have commented, "The reason I rob banks is because that’s where the money is."
Glass Steagal established the wall between commercial banking and
investment banking. That wall has been taken down. The
citizens have had a flirtatious relationship with non bank custodians
for their money. The ones that financial advisor types are
interested in have lost at least 25% of their money in the last ninety
days–many have lost much more.
Bond Guy used a great phrase…“getting them off the tracks before
they were run over by the bear train.” Briliiant imagry and damn
near everybody who is reading this failed at it.
It is not an excuse to suggest that you’re not guilty of malpractice simply because everybody else is too.
The banks have been patient watching the brokerage firms offer checking accounts and other forms of competition.
Survey the landscape. The players are gone–overnight they simply
disappeared. In their place we find Bank of America, Wells Fargo,
Citigroup, Union Bank of Switzerland, Bank of NY/Mellon–there maybe
others that I have forgotten.
Those players will want to consolidate even more–and a classic way of
eliminating the competition is to buy them and shut them down.
What would be the downside to Bank of America if they bought Raymond
James, merged the accounts into their existing network of bank owned
broker/dealers and shuttered the offices?
Why would the shareholders of RJFS care as long as they were paid a fair price?
Why would the venture capitalists who own LPL care as long as they were paid a fair price?
Why would the shareholders of SCHW care as long as they were paid a fair price?
It’s tough to hear somebody saying that what you’ve built your entire
dream on may be about to crumble–but screaming at the messenger
doesn’t change the validity of the message.
In a word...yes. Over and over and over, I'm hearing, "We trust you. That's why we're here." While most folks are not happy with the direction the market has gone over the past year, they understand that these things can and do happen. Most of my retirees, at least the ones who need to draw an income, had safeguards in place before this mess started and are thus not pushing the panic button. The last thing they'd want to do right now is leave an advisor they've trusted for years to go to a complete unknown. If LPL sold to a party that I didn't want to affiliate with, my contract says that my clients are mine and I'd simply move them to another B/D. Without hesitation, at least 98% of my clients would move. It's all about relationships in my practice and these clients value that relationship, even above better than average returns. The scenario you painted is possible despite the ethical lapses and contractual violations, but I'm very confident that my relationships would almost all survive such an onslaught. If you knew more about my actual situation, you might be inclined to agree. If you're just slinging stocks, bonds and funds, sure, you are vulnerable. My service goes well beyond the basics and that has made for a very loyal client base.Are you really so cock sure of your relatiionship that you’d be willing to turn your records over to a seasoned broker at Merrill and challenge that broker to steal your accounts?
I'm just asking a question. I don't know what the future will bring. There sure seems to be a lot of assets going the direction of RIAs. This can be either teams leaving b/d's and taking hundreds of millions of assets with them or RIAs taking in lots of assets like Adam Bold's Mutual Fund Store with $1Billion plus of assets. Forgive me if I'm misstating your opinion on this, but I believe that you believe that advisors get much in the way of assets based upon their employer or B/D. I don't buy this for one second. Our clients work with us. By and large they don't care about the B/D. They aren't leaving us to go to a bank or anywhere else. (This is doubly true in this environment when they aren't sure that they can trust the bank.) The proof of this is that when a good advisor leaves his firm, he can usually succeed in taking most of the assets with him.[quote=anonymous]Putsy, I think that you are the king of projection. You feel a certain way, so you think that everyone else feels the same way. Your right that the banks will dominate the retail brokerage market. The question is whether the retail brokerage market will dominate the financial advice industry. [/quote]
Do you envision some sort of Mom and Pop franchises with store fronts were people can stop in for some financial advice and a shoe shine?
Willie Sutton is said to have commented, “The reason I rob banks is because that’s where the money is.”
Glass Steagal established the wall between commercial banking and investment banking. That wall has been taken down. The citizens have had a flirtatious relationship with non bank custodians for their money. The ones that financial advisor types are interested in have lost at least 25% of their money in the last ninety days–many have lost much more.
Bond Guy used a great phrase…“getting them off the tracks before they were run over by the bear train.” Briliiant imagry and damn near everybody who is reading this failed at it.
It is not an excuse to suggest that you’re not guilty of malpractice simply because everybody else is too.
The banks have been patient watching the brokerage firms offer checking accounts and other forms of competition.
Survey the landscape. The players are gone–overnight they simply disappeared. In their place we find Bank of America, Wells Fargo, Citigroup, Union Bank of Switzerland, Bank of NY/Mellon–there maybe others that I have forgotten.
Those players will want to consolidate even more–and a classic way of eliminating the competition is to buy them and shut them down.
What would be the downside to Bank of America if they bought Raymond James, merged the accounts into their existing network of bank owned broker/dealers and shuttered the offices?
Why would the shareholders of RJFS care as long as they were paid a fair price?
Why would the venture capitalists who own LPL care as long as they were paid a fair price?
Why would the shareholders of SCHW care as long as they were paid a fair price?
It’s tough to hear somebody saying that what you’ve built your entire dream on may be about to crumble–but screaming at the messenger doesn’t change the validity of the message.
In a word...yes. Over and over and over, I'm hearing, "We trust you. That's why we're here." While most folks are not happy with the direction the market has gone over the past year, they understand that these things can and do happen. Most of my retirees, at least the ones who need to draw an income, had safeguards in place before this mess started and are thus not pushing the panic button. The last thing they'd want to do right now is leave an advisor they've trusted for years to go to a complete unknown. If LPL sold to a party that I didn't want to affiliate with, my contract says that my clients are mine and I'd simply move them to another B/D. Without hesitation, at least 98% of my clients would move. It's all about relationships in my practice and these clients value that relationship, even above better than average returns. The scenario you painted is possible despite the ethical lapses and contractual violations, but I'm very confident that my relationships would almost all survive such an onslaught. If you knew more about my actual situation, you might be inclined to agree. If you're just slinging stocks, bonds and funds, sure, you are vulnerable. My service goes well beyond the basics and that has made for a very loyal client base.[/quote] You've earned the right to have CPA after your name, and that takes your credibility to a whole other level. Those of us who have the 7 and 66 are a dime a dozen. I'd do business with you, Indyone, but most independents wouldn't have a chance at my business. I could drop by one day to see my independent advisor and find a deserted office. At least with Merrill, Morgan and Smith Barney I can be farily certain that they'll be bought by someone else if they run into problems.[quote=Provocative Put] Are you really so cock sure of your relatiionship that you’d be willing to turn your records over to a seasoned broker at Merrill and challenge that broker to steal your accounts?
[quote=Indyone]
[/quote]
I've been making my presence known on this forum for a couple of years, and during that time I've had exchanges with precious few guys and gals who I conclude might actually be professional enough to deserve my respect.
Indyone is one of them.
What I have not said very clearly is this.
As the industry consolidates there are going to be fewer and fewer firms that provide executions, custodial, compliance, clearing and so forth.
Y'all seem to think that if LPL disappears into a bank all you'll have to do is switch to another firm that does what you need to be done.
What I am saying is that within a couple of years the pressure caused by client arbitration demands could be so great that only bank owned firms can fund them.
Clients have the right to bring a cause of action against you. Even if it's frivilous, even if you can't understand how it could possibly be won---it can still be brought. When it is the individual rep will be named as a defendant but so will their broker dealer be named and their clearing firm will also be named if the clearing firm is separate. Attorneys may experiment and name third party research vendors as well.
Suppose half of a firm's clients bring an action--an extraordinarily high ratio but there is no prescedence for a meltdown quite like we've seen. It could start as a trickle--some truly pathetic cases are filed. In so doing the attorneys will get a taste for how the industry is going to defend itself and how the panels are reacting.
What I am suggesting is that the fee based on AUM model is so outrageous that it could result, early on, in extraordinary awards--which will have the effect of chumming the waters.
I don't mean to cite experiences from the 1970s but the saying, "Those who do not learn the mistakes of history are going to repeat them" is true--and the last time we had anything even remotely similar was the malaise of the 1970s.
My firm had branches who were sued so often that it appeared that the Marshall who served the papers simply waited in the hall for a courier to bring another set. All of those claims were filed for no other reason than people were not making money and attorneys were accusing our brokers of not upholding their fiduciary responsibility.
In other words cases were being filed, not because money was lost, but because money was not made.
People are funny about their money.
When you're whisting past the grave yard you convince yourself that you cannot lose an action. That's not really true--even if the panel does not award damages to the plaintiff the defendants lose time and time is money.
Consider how much time you would lose if only half of your clients called one day and told you, "Indy, I like you a lot and I trust you to be honest. But I was at a cocktail party last week and met an attorney who told me that he could get my money back, plus a 10% rate of return retroactive to when I opened my account with you so I am going to go that way. I hope this won't ruin our friendship, and I certainly do not blame you--but if I don't do this I won't be able to retire."
The bright side is that these cases are rarely heard by juries any longer. Juries are morons, there was once a jury that found a guy who cut his ex-wife's head off not guilty. That jury would have given a client who didn't make a profit in five years a sum equal to what they invested just to teach you a lesson.
Theoretically arbitration panels will not be driven by emotion and will use the full measure of their intellect to make a rational decision. But what will that mean?
Suppose Mr. and Mrs. Jones rolled, say, $2 million from a pension plan into a self directed IRA and engaged a financial advisor to "manage" the money for them.
Further suppose that it is now worth $1.2 million--down $800,000 so they contact and attorney and it's the day of the hearing.
You're a panelist--sworn to be as impartial as you can be. You've been trained by FINRA or some other arbitration organization so you, sort of, know the law and (intellectually) you accept that the registered rep who oversaw the loss of the $800,000 is not a bad person.
Then the procedings begin--remember you're a panelist.
The plaintiff is first. Mr and Mrs Jones are led by their attorney and they discuss how they worked for their entire life and that when they became millionaires on paper they were very proud. It was quite an accomplishment for a school teacher and an engineer at Lockheed.
They talk about what they had planned to do before the money was lost--the condo in Florida and the vacations and trips to see their grandchildren.
They also talk about their relationship with their "advisor." They recall the day they met him at his office. They saw the University of Iowa memorabelia on the walls--but didn't notice that there was no diploma being displayed. They assumed that the advisor was a graduate of Iowa, which spoke volumes in their part of the country.
They talk about how the rep would stop by the house once a year with a computer print out that had a lot of numbers. The rep explained that the result was a gain of 12% for the year, which was good since the averages were only up 10%. Anyway, they mention the fact that the rep stopped by once a year with a report. It was in a nice binder that made it seem very professional.
They also mention that they both got a birthday card and a "Happy Holidays" card in December. Finally they talk about meeting other clients at a pot luck supper that the rep and his wife held on a spring night at a pavillion in the park.
The defense attorney will then ask a few questons--designed to show that the client was kept aware of what was happening, and to solicit an admission that the client never indicated that the client was not pleased.
Perhaps the defense attorney will attempt to suggest that the client was intellectually very capable of understanding the risks.
Next comes the Rep.
His attorney will lead him through a series of statements designed to show that he had frequent contact with the client. You notice out of the corner of your eye that the plaintiff wife shakes her head in a negative fashion but she doesn't say anything.
There's not a lot the defense attorney can do with his client so very quickly the rep will encounter the plaintiff's attorney.
This guy is not going to be pleasant. He is going to ask very difficult questions to answer--things like "How much training did you receive for your position as a registered rep?" We all know that training is somewhere between none and not really very much. Regardless of what he rep says the attorney will be able to minimize it.
The attorney will ask about formal education. This is where those without degrees are on ice so thin it is virtually impossible not to end up tongue tied and looking like a fool.
Then the conversation will turn to compensation. The rep may explain that he is paid 125 basis points per year. The attorney will ask what that means and get the rep to admit that it means $25,000 on the Jone's account. The attorney will express amazement and ask, "Are you saying that you earn a fee like that every year, regardless of the quality of your advice?"
I challenge you to put a happy face on that question.
Anyway, within a remarkably short period of time the die will be cast. Remember, you're an arbitrator.
Are you so cold blooded that you tell Mr. and Mrs. Jones to take a hike--to suck it up and forget about the $800,000 that simply evaporated from their account?
Or do you decide to split the sheets and award the client $400,000?
Perhaps you recall the testimony that the rep has his office decorated with University of Iowa stuff, but didn't graduate from there. You conclude that he was trying to con the clients so you award the Jones the full $800,000 they lost plus $200,000 for their attorney.
This scene could play out with EVERY client on your books. Nobody knows for sure, but only an idiot thinks it won't happen a lot.
Back to Bond Guy's line, why did you not get your clients off the tracks before the bear train ran them down? Isn't that precisely what an advisor should have done?
Actually we only earn about 35% of that fee. The rest goes to the investment team managing the portfolio, the ones WITH the education, the ones WITH the fiduciary duty. What part of this arrangement did the client not understand? We explained it ad nauseum and they read and signed the papers. Give it up Putzy.The attorney will express amazement and ask, “Are you saying that you earn a fee like that every year, regardless of the quality of your advice?”
[quote=Reggin][QUOTE]The attorney will express amazement and ask, “Are
you saying that you earn a fee like that every year, regardless of the
quality of your advice?”[/quote]
It doesn't matter if the client understood the relationship and signed papers--when they're sitting there they'll say, "Yes that's my signature but he was rushing me and never really did explain it to me."
Then their attorney will choose a particularly wordy portion of the agreement, ask the rep to read it aloud and then explain it.
Does the fact that you only earn a portion of the fee mean the fee was fair to the client?
Your childlike belief in things like signed documents is charming---in a six year old discussing their views with their Daddy at the dinner table.
Your childlike belief that signed legal documents have no bearing on arbitration is foolish. Please keep up the fearmongering, it is humorous.
I really missed your doom & gloom babblings around here Putsy…
But you're only partially right on this one. Yes the industry is consolidating in order to drive out inefficiencies. No it will not squeeze out the independents. In every major city the landscape is dominated by large banking power houses such as BofA,C,JPM or WF but you will always find the presence of the "community bank". Ya'll know those little nicely tree lined brick banks with neatly manicured lawns. They have carved out a place for themselves among the power house banks in every major metropolis & they are not going anyway...the reason comes down to the same concept that we all have been echoing here & that concept is...."personal relationship". That's how many independents run their book & that's why I have lost 0 (zero) accounts ytd. Not saying its not possible in the future but when you build longterm relationships that are based on the right principles you can get through almost any kind of market with your clients even a crappy one like we're having now. No doubt that clients are not "happy" with their performance but I can also rest assured that after years of service they aren't going to turn around and sue me either. One can only gain that level of confidence if you've built a service model within your practice Put.[quote=Broker Fee]I really missed your doom & gloom babblings around here Putsy…
But you're only partially right on this one. Yes the industry is consolidating in order to drive out inefficiencies. No it will not squeeze out the independents. In every major city the landscape is dominated by large banking power houses such as BofA,C,JPM or WF but you will always find the presence of the "community bank". Ya'll know those little nicely tree lined brick banks with neatly manicured lawns. They have carved out a place for themselves among the power house banks in every major metropolis & they are not going anyway...the reason comes down to the same concept that we all have been echoing here & that concept is...."personal relationship". That's how many independents run their book & that's why I have lost 0 (zero) accounts ytd. Not saying its not possible in the future but when you build longterm relationships that are based on the right principles you can get through almost any kind of market with your clients even a crappy one like we're having now. No doubt that clients are not "happy" with their performance but I can also rest assured that after years of service they aren't going to turn around and sue me either. One can only gain that level of confidence if you've built a service model within your practice Put.[/quote]The community bank anaolgy is not a valid one. First the community bank is not dependent on a second party clearing and execution vendor who will be under incredible financial stress just to defend itself against a never ending series of actions--demands for arbitration hearings.
For the umpteenth time, Wall Street has NEVER experienced a loss of trillions of dollars in market value--mostly lost by people who are currently or about to retire. They do not have time for it to come back--regardless of how much their heart tells them to.
You have to be intentionally obtuse to not recognize that there are plaintiff's attorneys out there who advertise on TV, radio and in magazines such as AARP who will be more than glad to take anybody's case for no fee--none, zilch, nada--unless they win.
If you were the Smith family and your account is down a quarter of a million, and all you have to do is is dial 1-800 and talk to a guy who tells you not to worry because he will help you.
I tell you what. If I was not who I am I'd do the same thing. The odds of $500,000 returning to $1,000,000 through the arbitration process are far greater than by market action during he coming decade.
"Mike, I know you did the best job you could, and I know that the markets are dangerous--but you really should have been paying more attention to my situation and I met a lawyer who tells me......................."
Just because it hasn't happened since 1982 doesn't mean it can't happen.
Do you think that there was no documentation in the 1970's blizzard of law suits?
When they come, and they will come, the small firms--and basically all firms that are not divisions of banks are small firms--are going to need every spare penny to defend themselves. There will be no money for anything else.
I didn't just get off the boat. No matter how much experience you have, I have more.
[quote=Provocative Put]Do you envision some sort of Mom and Pop franchises with store fronts were people can stop in for some financial advice and a shoe shine?[/quote]
Now that I single handedly pushed the market up for a change today, time for a quick Putsy break.
That’s a great question you raise, Putsy, as it helps focus in on a key misconception underlying your points. Here’s a link from today’s Investment News of the type of “mom and pop” “muffler and financial planning” franchises you seem to imagine are the norm for independents:
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081022/REG/810229987/-1/rss02&rssfeed=rss02
An here’s the executive summary for those not inclined to read the whole thing: (1) a $900 MM Merrill team just left ML to create their own RIA; (2) a UBS team with $750 MM recently opened an RIA firm, despite multi-million dollar offers from ML and other wires; and (3) a third million dollar ML broker is quoted as saying, "The competitive advantage of a wirehouse platform has become a
disadvantage. The paradigm has changed."
I may have missed it but I’m pretty sure neither of these mom and pop shops will use the words “muffler” or “brakes” in their company name, nor are they likely to offer many shoe shines. Of course, I’m just guessing there, kind of like you are doing with your prognositations about the coming dominance of megabanks. But I digress.
If you think these are anomalies, you obviously haven’t been paying attention. The trend is very clearly the exact opposite of what you imagine. Here’s an excerpt from an article in January’s Registered Rep magazine: "From September 2006 through September 2007, Schwab Institutional netted
$129 billion in net new client assets, just short of Merrill Lynch,
Smith Barney, Morgan Stanley and UBS combined during the same time period."
You might need to re-read that to make sure you didn’t miss that part about all wirehouses combined.
Want more evidence of this trend?
As reported in the 4/28/08 issue of Investment News, Schwab Institutional took in MORE new assets in the first quarter of 2008 than ML, SB and MS combined - $19.9 B for Schwab vs. $14.4 B for all the others combined. Fidelity, the #2 institutional custodian, also took in more new assets than all these wires combined - $14.6 B.
More recent numbers? Same story through last available data, Q2 2008:
“Schwab Institutional,
the firm’s RIA custodian, reported $34 billion in net new client assets
for the first two quarters of 2008, $9.4billion of which came from
wirehouse advisors. (In all of 2007, only $9.2 billion in net new client
assets came from wirehouse FAs.) Fidelity’s Institutional Wealth
Services division, Fidelity’s RIA custodian business, brought in $31.3
billion in net new client assets through the first two quarters of 2008.
Of that, $7 billion came from wirehouse FAs.”
"With the
exception of Morgan Stanley, which brought in $24.7billion in net new
client assets in the first six months of 2008, the other wirehouse firms
have had a markedly different experience this year: Merrill Lynch lost a
net $1 billion in client assets in the first half of 2008; Citigroup’s
Smith Barney lost a $12 net billion in client assets during that period;
and UBS’ U.S. Wealth Management unit lost a net CHF 3.9 billion in
the period."
I could go on, Putsy, but I think it’s clear that the megabank trend you predict is not only not supported by the facts, it is demonstrably contradicted.
But other than that your prognostications makes for entertaining reading.
Morphius, what part of “EVERYTHING IS DIFFERENT NOW” can you not grasp?
Pulling up obscure websites with moldy statistics is meaningless.
Holy crap. This has to be the most dedicated thread I have seen. We're talking Pulitzer here...
Put, do you actually work??
[quote=B24]
Holy crap. This has to be the most dedicated thread I have seen. We’re talking Pulitzer here…
Put, do you actually work??
[/quote]As little as possible. Isn't that great so I can spend so much time discussing the industry with the boys--there seems to be no girls here any more.
Babbling is probably at a car show--she was the only girl worth my time. Wait--that's not really true--there was a gadfly gal who was in touch with reality and a zealot of sorts who may, or may not, have been a girl.
Can't think of any other girl worthy of my attention.
[quote=Provocative Put]Morphius, what part of “EVERYTHING IS DIFFERENT NOW” can you not grasp?
Pulling up obscure websites with moldy statistics is meaningless.
[/quote]
Ah. Silly me … wasting time by citing current facts from prominent industry magazines when they contradict your personal crystal ball. What was I thinking?! Sheesh! Of course they are meaningless!! Of course they are moldy!! Of course they are from obscure websites, like the one from the sponsor of this obsure forum!! D’oh!
Mea culpa for not realizing how meaningless mere facts are when confronted with the sheer power of your guesses!
Perhaps if you had simply explained to me earlier that all facts get thrown out the window because it’s DIFFERENT this time. Again. Because I’ve never heard anyone else make that claim before. Except THIS time it’s REALLY different, not different like all those other times different, but, like totally different different.
Hey Putz,
Be sure to wear your Depends tonight when you walk the beast because you are full of shiit.[quote=Morphius]
[quote=Provocative Put]Morphius, what part of “EVERYTHING IS DIFFERENT NOW” can you not grasp?
Pulling up obscure websites with moldy statistics is meaningless.
[/quote]
Ah. Silly me … wasting time by citing current facts
from prominent industry magazines when they contradict your personal
crystal ball. What was I thinking?! Sheesh! Of course
they are meaningless!! Of course they are moldy!! Of course
they are from obscure websites, like the one from the sponsor of this
obsure forum!! D’oh!
Mea culpa for not realizing how meaningless mere facts are when confronted with the sheer power of your guesses!
Perhaps if you had simply explained to me earlier that all facts get thrown out the window because it’s DIFFERENT this time. Again. Because I’ve never heard anyone else make that
claim before. Except THIS time it’s REALLY different, not
different like all those other times different, but, like totally different different.
[/quote]
Virtually all stats that are more than thirty days old are worthless.
Investor sentiment is now such that if there is any rebounding at all it will be used to sell so that losses are reduced.
That’s why it will take YEARS to return to where it was sixty days ago.
Stats that were gathered as recently as July or August are as
meaningless as the September 11, 2001 menu at Windows on the World.
Everything is different.
[quote=Mucho de Tejas]Hey Putz,
Be sure to wear your Depends tonight when you walk the beast because you are full of shiit.[/quote]Hey that's really clever, I'll have to remember that in the future. What makes you much of Texas--I happen to know more than a little bit about Texas myself.
[quote=Provocative Put]
Everything is different.[/quote]
If everything really is different, isn’t all your years of experience and insight that you are relying on to make your guesses now, by definition, worthless? I mean, EVERYTHING is different, right?
Or are you the exception, so everything is different except your omnipotence?
It’s gotta be one or t’other. Just wondering which it is.
[quote=Morphius]
[quote=Provocative Put]
Everything is different.[/quote]
If everything really is
different, isn’t all your years of experience and insight that you are
relying on to make your guesses now, by definition, worthless? I
mean, EVERYTHING is different, right?
Or are you the exception, so everything is different except your omnipotence?
It’s gotta be one or t’other. Just wondering which it is.
[/quote]
It is different than it has been since 1982, and more like it was from 1968 to 1982.
You have no memory of the market from 1968 to 1982 but for those of us who do this smells just like those years.
Up to and including a probable president who will make Jimmy Carter’s
administration appear to have resulted in positive economic results.
It got pretty cold tonight–that’s different than it was yesterday, but not different than it was eight or nine months ago.
[quote=Provocative Put]It is different than it has been since 1982, and more like it was from 1968 to 1982.[/quote]
Got it. Thanks for clarifying. So everything is different, except that it’s like it was a while ago. Gotcha.
Now I understand why facts aren’t of any value in this situation.
This thread has become verbose and boring as all sh*t . You guys should give it a rest.
JMHO
[quote=Sportsfreakbob]This thread has become verbose and boring as all sh*t . You guys should give it a rest.
JMHO
[/quote]
Is someone forcing you to read every post in threads you find verbose and boring?
Branding is the biggest farce. Bank of America gets their lunch eaten everyday, by good advisors. Indy is far superior. People want local personal advice they trust. . . period. You can gather $100 MM in client assets get paid 85% and have a great life without Banc of Amigo. You also have a valuable business that is worth approx 2 to three times gross. When you are ready to retire you have another $2 million to cash out.
With Bank of Amigo you own nothing and need to gather 4 times the assets to equal the comp. No freedom, big corporate non sense. Re-earning your trails every year. Its all crap. Those clowns want you to think their brand means something. Merrills brand is kaput and tainted. The bulls balls have been clipped. Bank of America will implode on itself eventually. Too big to be managed efficiently, like our beheomuth US govt buracracy[quote=daytradah]
Bank of America will implode on itself eventually. Too big to be managed efficiently, like our beheomuth US govt buracracy [/quote]or like Citi
Provactive Putz:
The idea that the Bank of Amigo brand will trump local relationships is non sense. Clients trust their advisor before brand if you are half way average. You are your brand.
You are in fact REPLACEABLE as a big brand bank broker. You are diluted and can be replaced when they decide to get rid of you.
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