Citi & MS combined brokerage?

Maybe ML will be xfering there

Just watching this initial news unfold on FoxBusiness.  Just when I thought the craziness was over. 

1) Potential massive power brokerage

AND / OR

2) This causes massive change in the recruiting/transition game very quickly!

Either way, I’ll make this bet. If these 2 combine up… retention for those involved will be done and over with BEFORE WFC figures out if or how they’ll retain Wachovia advisors

Will there be retention? Or will they drop off smaller producers and hope to get Wach and ML looking to leave?

Next step:

In my view, a combo of SB and Morgan would be a incredible. Loads of managers no longer needed along with overlapping support staff, back office, etc. I see advisor demand stall out for a time at least.

Potentially at least in the near term why would they keep big recruiting push on?

Joint venture, where MS gets larger stake, but has to pay Citi for it. MS can also purchase additional stake and eventually entire portion of Citi’s in a period of years following.

And I was hoping to interview with MS as a newbie for their training program... guess that will fall to the waste side, agghhh!

Both comanies failed to manage there own money. Why would the public trust them to manage any thing? Let alone assets! 

UBS has been setting up brokerage to sell it for awhile from what I hear often, can you imagine all three being together…See of B of A and WFC dropping out completely of the deals of the past…if this scenario takes place no deals or very very reduced deals for a long time.

I just walked into a MS office in NJ and told them I was interested in a career as an FA with them.  Although the Branch Manager was impressed that I showed up without an appointment, he informed me that he received an email not 2 hours earlier stating that the new trainee program was suspended until further notice.

UBS has been setting up brokerage to sell it for awhile from what I hear often, can you imagine all three being together…See of B of A and WFC dropping out completely of the deals of the past…if this scenario takes place no deals of very very reduced deal for a long time.

[quote=fritz]UBS has been setting up brokerage to sell it for awhile from what I hear often, can you imagine all three being together…See of B of A and WFC dropping out completely of the deals of the past…if this scenario takes place no deals of very very reduced deal for a long time.

[quote=Potential][quote=fritz]UBS has been setting up brokerage to sell it for awhile from what I hear often, can you imagine all three being together…See of B of A and WFC dropping out completely of the deals of the past…if this scenario takes place no deals of very very reduced deal for a long time.

the info. about the training program at MS disappearing is bogus.  Still have 2 types of trainees MS is hiring, rainmaker and team style.

[quote=benjamin]

the info. about the training program at MS disappearing is bogus.  Still have 2 types of trainees MS is hiring, rainmaker and team style.

Now it makes perfect sense as to why Sally Krawcheck resigned as head of SB’s wealth mgmt. area.  This joint venture has been in the works for some times & she was not about to play second fiddle to Morgan Stanley’s James Gorman!

I just hope that when the music stops we all will still have a seat

The House of Morgan lives!

This is the end of the party. Once this deal happens its all over. They will lop off the smaller producers (what does that mean - under 300k, under 400k? under 500k? (anyones guess)

Retention? You can fuggedaboutit
Deals go way way down - at best.

The inmates will no longer run the asylum. Power leaves the cell block and goes to the hands of the warden.
Game over.

I bet you won’t see a retention package. Not after the billions pumped into MS and especially C. Why Barny Frank will turn straight and marry Jennifer Anston before they dared pay a retention! ROFLMAO!!

[quote=Sportsfreakbob]This is the end of the party. Once this deal happens its all over. They will lop off the smaller producers (what does that mean - under 300k, under 400k? under 500k? (anyones guess)

Retention? You can fuggedaboutit
Deals go way way down - at best.

The inmates will no longer run the asylum. Power leaves the cell block and goes to the hands of the warden.
Game over.
[/quote] 

It is a big leap for a career wire guy to move to indie or even to a Regional. The platforms the culture, the name familiarity that clients look for before they move.
When i say the party is over i am referring to the brokers who move from one idiot wirehouse to another, the idiot wirehouses who are trading brokers for millions. It was great while it lasted, for the brokers, but for the wires, its the most ridiculous business model i ever saw in my life and its over.

On another note, Citi should be ashamed of itself. The geniuses that have run that company for the last few years, including the Board members, all taking in millions of dollars for themselves, would have to commit Hari Kari if they were in Japan. This is a company that was the star of the show a few years ago. And now they are so hard up for cash that they have to sell themselves to a company that almost went out of business two months ago. What a joke.
Pandit does nothing but send out memos to employees in foreign tongue - corporate language that normal people dont even understand. Asks us to thank Bob Rubin on his way out for his 10 years of wonderful service to our fine firm. These guys must shave without a mirror, because i dont know how they can look at themselves in one.

The problem all along with Citi is that it never worked together… Sandy built assets but fired Dimon before he could do what he is doing at JPM, which is combining those assets to work together…

Everyone wants to talk about the indy's and regionals being big winners, but when all this settles down the wires are going to be lean, mean, and extremely profitable.  They'll be rid the dead weight of < $400k producers and too much management, and full of star producers with big clients.  When the dust settles over the next 12-24 months, the wires are going to have a great business model and we all should be buying their stock for our clients.  

Sellout:

As Ed McMahon parroted every night.....You are correct Sir

If a producer is doing $350,000 gross, the company keeps $220,000 of it.  How many employees of how many companies are considered “dead weight” if their profitability to their firms is more than two times what the company’s costs are?
The idea that indy producers doing that kind of gross can keep so much more of their production for themselves suggests that they’re not really dead weight at all.  No, the problem is that the firms are so horribly managed, their balance sheets so irreparably screwed up, that they need to run to the government to keep them from going bankrupt, despite the fact that they run a business model designed to screw their clients, and their employees, and their investors.  A trifecta.  That even with astounding profit margins in their wealth management arms, even with more than 100% of their profits derived from the tiered cash management programs.  Yes–MER and SB would have lost money, had they not treated cash investors’ assets as their biggest cash cow, giving up 0.04% and lending at 6.0%, WITH 9-15x leverage.

There will always be a place for the big producers at the big wirehouses.  Guys who need a huge inventory of bond, or a strong investment banking arm–assuming you can find one lately–or those who just like to say they’re a Managing Director at a firm with a nice commercial on CNBC, or who still has unvested stock options still worth sticking around for, despite being down 80% across the board.  It’s less obvious why anyone not making $750k gross would want to stick around.

[quote=Sellout21]

Everyone wants to talk about the indy's and regionals being big winners, but when all this settles down the wires are going to be lean, mean, and extremely profitable.  They'll be rid the dead weight of < $400k producers and too much management, and full of star producers with big clients.  When the dust settles over the next 12-24 months, the wires are going to have a great business model and we all should be buying their stock for our clients.  

That’s kind of the point… Once you hit a certain mark, referrals and other(depending on where you are) are the main sources of your business…

[quote=Sellout21]

Everyone wants to talk about the indy’s and regionals being big winners, but when all this settles down the wires are going to be lean, mean, and extremely profitable.  They’ll be rid the dead weight of < $400k producers and too much management, and full of star producers with big clients.  When the dust settles over the next 12-24 months, the wires are going to have a great business model and we all should be buying their stock for our clients.  

If Larry Flynt needs a bailout, rest assured there will be an indy B/D that will need one.  Give it a little time.  They won’t get a gov’t bailout though, it will be in the form of merger/takeover. 

[quote=Bud Fox]If Larry Flynt needs a bailout, rest assured there will be an indy B/D that will need one.  Give it a little time.  They won’t get a gov’t bailout though, it will be in the form of merger/takeover.  [/quote]

You think so?

Why has it not happened yet, while Lehman has failed, Merrill essentially failed and was rescued by Citi.  Bear was only bought by JPM after the government provided support and encouragement.  Citi needed capital infusions from the Arabs, who now own about 40% of the company and then 2 more bailout packages from the government.  Morgan Stanley needed billions from Mitsubishi and then they still had to convert to a bank holding company and take TARP money.

And then of course we have Watchoverya, who bought and destroyed the Edwards franchise and had to be rescued by Wells Fargo less than a year later.  I don’t remember if there was any government bailout money involved there.

All the above has occurred in the last 9 months or so.

So - how many independent b/d firms have needed a bailout?

There was one that I recall failed about a year ago on the West Coast.  Smallish player who got caught up in CMO’s and margin if I recall.

[quote=HymanRoth]

[quote=Bud Fox]If Larry Flynt needs a bailout, rest assured there will be an indy B/D that will need one.  Give it a little time.  They won’t get a gov’t bailout though, it will be in the form of merger/takeover.  [/quote]

You think so?

Why has it not happened yet, while Lehman has failed, Merrill essentially failed and was rescued by Citi.  Bear was only bought by JPM after the government provided support and encouragement.  Citi needed capital infusions from the Arabs, who now own about 40% of the company and then 2 more bailout packages from the government.  Morgan Stanley needed billions from Mitsubishi and then they still had to convert to a bank holding company and take TARP money.

And then of course we have Watchoverya, who bought and destroyed the Edwards franchise and had to be rescued by Wells Fargo less than a year later.  I don’t remember if there was any government bailout money involved there.

All the above has occurred in the last 9 months or so.

So - how many independent b/d firms have needed a bailout?

There was one that I recall failed about a year ago on the West Coast.  Smallish player who got caught up in CMO’s and margin if I recall.
[/quote]

MER,C,MS,GS,BAC,WB were all hurt/brought down by bad mortgage, CMO,investment banking et al f&*k ups. The brokage/wealth management were all profitable. In this enviornment profitability is bound to falloff or go negitive. Thats why the upfronts are all being cut. If you don’t get a market/economy turn around in late 2009, early 2010 a lot of small and medium firms will be in trouble. My fear after seeing “THE ONES” economic plan is we are in for a rough ride.

Hydeo…that is precisely why banks shouldn’t own brokerage firms.  The indpendent and regional models have passed the test.  The investment bank and universal bank model failed miserably…every one of them, with the exception of Goldman, they have so far been like a weeble, they wobbled but didn’t fall down.  The big firms don’t have the brand they used to, and have cut home office support levels to the bone.  MS and SB guys will see another drop off in support if this deal goes through.  We have all paid for the bankers mistakes.

[quote=mnbondguy]Hydeo…that is precisely why banks shouldn’t own brokerage firms.  The indpendent and regional models have passed the test.  The investment bank and universal bank model failed miserably…every one of them, with the exception of Goldman, they have so far been like a weeble, they wobbled but didn’t fall down.  The big firms don’t have the brand they used to, and have cut home office support levels to the bone.  MS and SB guys will see another drop off in support if this deal goes through.  We have all paid for the bankers mistakes.[/quote]

Agree.
The wires have become the banks barbie dolls. And the banks just throw the wires on the junk heap when they are done playing.
SB has already lost a lot of support and loses more each day. Every day you find someone who you used to work with is gone.
As far as the previous posters comment about the deals getting cut because the banks have no profitability-thats part of it. But another part of it is that they are smart enough to know that whatever the t-12 a broker shows them, its gonna be a whole lot freakin lower in a year.  And the third reason about to hit the scene, is that there wont be any competition left after this new deal goes thru. Assets have been very very valuable to the firms. Well guess what - they wont be so valuable (read:productive) going forward. My prediciton is that just like the market is at 2000 levels, so will the deals be, before you know it, which if i recall was somewhere around 100% all in, with maybe 75% up front - for the A+ GUYS!!!

I read earlier today that what is expected is that Gorman will be the top guy in the new joint venture, and Charlie Johnston will be number two. Which means if you are at either firm, and are 10 ys plus LOS, you better be doing a solid 400k, at least (i think 500 is gonna be the new 400 if this deal goes thru, but i wont go out on a limb, so lets leave it at a solid 400k.

I feel that 10 yr LOS is stretching it.  I would bet more like 5 yr LOS and 400k. It will flush out a lot of low ballers and that is what the industry is seeking.

[quote=Hydeho]

[quote=HymanRoth]

[quote=Bud Fox]If Larry Flynt needs a bailout, rest assured there will be an indy B/D that will need one.  Give it a little time.  They won’t get a gov’t bailout though, it will be in the form of merger/takeover.  [/quote]

You think so?

Why has it not happened yet, while Lehman has failed, Merrill essentially failed and was rescued by Citi.  Bear was only bought by JPM after the government provided support and encouragement.  Citi needed capital infusions from the Arabs, who now own about 40% of the company and then 2 more bailout packages from the government.  Morgan Stanley needed billions from Mitsubishi and then they still had to convert to a bank holding company and take TARP money.

And then of course we have Watchoverya, who bought and destroyed the Edwards franchise and had to be rescued by Wells Fargo less than a year later.  I don’t remember if there was any government bailout money involved there.

All the above has occurred in the last 9 months or so.

So - how many independent b/d firms have needed a bailout?

There was one that I recall failed about a year ago on the West Coast.  Smallish player who got caught up in CMO’s and margin if I recall.
[/quote]

MER,C,MS,GS,BAC,WB were all hurt/brought down by bad mortgage, CMO,investment banking et al f&*k ups. The brokage/wealth management were all profitable. In this enviornment profitability is bound to falloff or go negitive. Thats why the upfronts are all being cut. If you don’t get a market/economy turn around in late 2009, early 2010 a lot of small and medium firms will be in trouble. My fear after seeing “THE ONES” economic plan is we are in for a rough ride.
[/quote]

proprietary trading, product manufacturing, and investment banking are all essential parts of the wirehouse model.  Exactly my point!

[quote=Bud Fox]I feel that 10 yr LOS is stretching it.  I would bet more like 5 yr LOS and 400k. It will flush out a lot of low ballers and that is what the industry is seeking.[/quote]

You may be right. I’m just pulling numbers out of my…hat. Whatever the numbers, its gonna be ugly for a lot of FA’s

[quote=Bud Fox]I feel that 10 yr LOS is stretching it.  I would bet more like 5 yr LOS and 400k. It will flush out a lot of low ballers and that is what the industry is seeking.[/quote]

You may be right. I’m just pulling numbers out of my…hat. Whatever the numbers, its gonna be ugly for a lot of FA’s

There was one that I recall failed about a year ago on the West Coast.  Smallish player who got caught up in CMO’s and margin if I recall.
[/quote]

There was one that I recall failed about a year ago on the West Coast.  Smallish player who got caught up in CMO’s and margin if I recall.

LPL and RJ are basically small wirehouses.  

What's the problem with LOS< 5 years?  Would you rather have someone who is LOS 3 at 250K or someone LOS15 with 500K?  Who is the bottom 30% in this example?

Actually, LOS 3 @250k is doing well. On the right track.  LOS < 5 and you are still considered an apprentice and they have benchmarks for you to hit.  I believe they are going to start nipping off these guys with LOS 6 - 10 doing 100-300k. 

so–if the MS-SB deal happens for sure as a JV…is your opinion that if I am a MS rep right now and SB has been recruiting me with a 200% deal…1) are the 2 firms still considered completely separate from a client perspective  2) should I take the deal asap  3) how long do you think the deal will be on the table

The deal is off the table. Do you honestly think if they are in serious talks, that SB is going to approve your deal? Only if the talks break down. If they dont, and the deal is done, then you are standing at the dock, watching the ship leave port without you.

G1, I heard managers at both firms were told to end talks with anyone they’ve been talking to from the other firm. So I would think your deal is off the table.   



I also read the new JV would be called Morgan Stanley Smith Barney (how creative). That seems a little wordy to me, but I guess they didn’t want to just do away with one of the names.

[quote=OS]
I also read the new JV would be called Morgan Stanley Smith Barney (how creative). That seems a little wordy to me, but I guess they didn’t want to just do away with one of the names. [/quote]

Yes, wordy, sort of like Merrill Lynch Pierce Fenner and Smith. Wasnt there a firm with that name once, back in the day?

How will this affect newhires? I passed my tests and I am just about to head to warren for PS1 with SB. Anyone know the direction how this will affect people like me?

Anyone know how this will effect trainees? I passed my tests and I am heading to NJ for PS1 with Smith Barney soon. How will this affect people like me?

newguy



IF, the merger goes through it will have no affect other than maybe taking a large pool of previously eligible prospects (Morgan clients) off the table. The firms will operate separately for a long time. It took 9 years for Morgan Stanley and Dean Witter to officially merge to one broker dealer! (as registered with SEC)

Any idea if SB will be able to continue recruiting outside of MS reps?? 

I would think there would be a moratorium for awhile (assuming a deal is really closed) but if the 2 firms stay separate under a Joint Venture–why would they not continue to recruit, regardless of company-it could take 5,8, 10 years before it comes one final company 

I would assume that since you are under a contract and have passed-it won’t affect you at all

Will SB continue recruiting MS FAs? Hahaha, that would be great for the MS guys.

citi also has the bank brokerage that took smith barneys platform last year.  what about these guys.  i guess since their average production is about $300k morgan will want to leave them in their crappy branches at citi.  but wait maybe they will bring them over to start the new morgan stanley bank up…

There are some high producers in the Bank offices. In fact the average production per FA in the Citi/SB bank channel is almost on par with the SB legacy branches.  There are only about 700 bank based FA’s.  I do not think that the low end producers in the bank channel will last.  They are on the same grid, and sub 400K producers with LOS of more than 7 years of service just got a pay cut like in many of the other firms. 

I wonder what will happen to good producers in the bank channel.

NEWGUY44 you can work with me in my practice. 

Deal is done as I’m sure all here have heard. I’m betting an announcement to the field on recruiting each firms brokers is out by Friday this week. Retention is already being talked about as well. 

I am guessing that most MS/SB advisors will stay and take the retention. Why would you move? Where would you go? You could go to UBS for a fat check, but chances are your production will suffer in the short term, which would offset the retention bonus being smaller than a check to move. I guess I don’t see many MS/SB brokers moving unless they try to cut out the lower producers like ML/BAC did.

“Citi is basically going back to close to what it was 30 years ago when I first started in banking,” says Ezra Zask, a director at the consulting firm LECG, who was a global trading manager at Mellon Bank in the late-1980s as Citi was expanding its banking operations. “It’s like a 30-year experiment that didn’t quite work.”