Forgivable Loan forgivable?

If you leave your book behind the wirehouses typically do NOT come after you. If you go work for a competitor and "attempt" to bring those clients along, you're pretty much hosed and I can't say I blame them since that's what you got that "loan" for---those assets, your clients.

Speak to a real NASD arb lawyer before you walk out the door. By real, I mean someone with 5 years plus specializing in NASD arb only whose track record is .800 or better. Don't sell yourself short by trying to be cheap. That means steer clear of the divorce court lawyers who practice NASD arb on the side.

NOT NOT NOT TRUE!!! they will come after you. PM me if you need more.

Why don’t you read your contract. The answer is in there.

couldn't respnd to your PM.

Hers a quick summary:

Your up-front money is amortized over a certain time frame (ie 4 years), that amortization is then taken out of your offices p&l (expensed) on a yearly basis. If you leave, the amount that is left immediately hits the p&l as an expense, your manager takes the whole hit in that year. He could care less if you leave your book because that amount is an expense that affects his bottom line more than your books revenue affects the top line. Believe me they will come after you. Try selling your book to someone in the office to offset the amount you will pay in arbitration. I tried being a good guy once and I still got a demand notice, good luck to you.

Same here.  Left the book, started over elsewhere.  I told the branch manager I was dead broke and leaving my book.  He was a nice guy but told me the home office didn't care about the book.

  You signed a legal document that says upon termination (for any reason) you owe back the balance.  I left two years into a five year deal and paid back (after negotiation) .46 on the dollar of what they demanded (the pro - rated 3 year balance of the loan).  I think if I had negotated harder I might have done better, but I got to the point where I just wanted it off my back.

Negotiate a one time settlement - don't let them convince you to make monthly payments.  Also make sure they pay the taxes on the settlement (I didn't and got a $25k bill from uncle Sam).  Whatever they forgive (and they WILL forgive some of it) is taxable income 1099.  Good luck.  An upfront check always sounds so great but it is often a heavy anchor.  Next time get a big fat payout or annual look backs.  Live and learn.

you could have told me that earlier

You wouldn’t have come and I wouldn’t get my override

Somebody explain to me how these forgiveable loans work…Does a firm offer you $$ to come over but you have to stay a certain time frame in order to not have to pay them back?

You are given an upfront check based on your assets and production. The money is considered a forgivable loan. Which means every month a portion of the loan is forgiven. If you take a check that amount is forgiven over the length of the loan. Example would be you take a check for 420k and it is forgiven over 60 months. You then pay tax on what is called “phantom” income monthly. So, each month for 60 months you pay tax on the income that was forgiven that month. In this instance $7,000/month would be forgiven and you pay tax on that as if it was income until the entire loan is “forgiven” and has been taxed over the 60 months. I summarized a bit, but this is idea.

They gave you the money up front and you signed a contract to pay it
back.  What in the Heck would make you, or anyone else, think you
do not have to pay it back?  They gave you money and you spent it
before it was really yours.  Pay it back, every penny of it, even
if you have to set up some sort of payment plan. 



As for leaving clients…who cares?  How do you value the clients
you leave and how does that reduce what you owe them?  Those
clients could leave on there own accord any time…they cannot rely on
that.



 

I understand what you are saying rightway and I agree.  I am not trying to weezle my way out of an agreement, but I do think some credence should be given to the fact that they changed the rules on my part way though the deal.  They cut my grid payout and for that I think some consideration should be given on both of our parts for my “failure” to perform to the standard they or I would want.

I agree with dividends. Broken promises means I fight to keep the money.

And…based on BAC’s recent losing precedents in arbitration concerning those broken promises, I’ll take my chances in trying to retain that money should I leave.

I agree with rightway:  a contract is a contract is a contract.  I doubt it says in there "you owe the $ back if you leave, unless you decide we didn't measure up to your standards."  A solution to this "problem" is called due diligence--you ask LOTS of questions of people with many different perspectives.  Seems enlightening (or at least interesting) that someone who uses the handle "rightway" says you should honor a legal contract, but someone who has chosen "ezmoney" doesn't.  Who woulda thought?

The bottom line is that if and when you change firms, you are making a risk/reward decision.  Just because you made it poorly doesn't mean you should get a do over--just learn from it and move on.

[quote=Cowboy93]

I agree with rightway:  a contract is a contract is a contract.  I doubt it says in there "you owe the $ back if you leave, unless you decide we didn't measure up to your standards." 

[/quote]

Again, the issue with me is not that they didnt "measure up to standards."  It is that they changed the measuring stick.  Half-way through my contract they basically decided to cut payout of about 1/3 for my production level.  I have had very nice production and AUM growth since coming here and believe that I have done OK work for the firm.  Is it the best?  No, I understand I am behind the curve a little and this is not an excuse.  I just feel like ceteris paribus from the start of employment I would not consider leaving had their rules stayed the same.

Hey - I say you fight to keep as much money as you can.  The large wire house wouldn't hesitate to cut you loose if you became a liability.  They would have no loyalty to you.

Fight it in any way you can.  You owe it to your family to hold on to as much of that $ as you can.  That's just business.

Ask anyone who paid back $ and they wish they had fought back harder (myself included).

I hired two attorneys: first was a securities lawyer who spent many years at the SEC.  He got me a 50% discount on the balance owed, but I never made a payment.

Then 5 years later, I hired a bankruptcy trustee attorney (no, I didn’t actually file a bankruptcy, it was just a tactic) to negotiate a lump sum payment equal to 10% of the balance owed. So I did. I think it worked out well for me. Hope it works out better for you.

When you hire an attorney, make sure they are highly regarded in their field so opposing counsel takes them more seriously. Just my 2 cents.

I like your style. Good strategy.

[quote=skeedaddy2]I hired two attorneys: first was a securities lawyer who spent many years at the SEC.  He got me a 50% discount on the balance owed, but I never made a payment.

Then 5 years later, I hired a bankruptcy trustee attorney (no, I didn’t actually file a bankruptcy, it was just a tactic) to negotiate a lump sum payment equal to 10% of the balance owed. So I did. I think it worked out well for me. Hope it works out better for you.

When you hire an attorney, make sure they are highly regarded in their field so opposing counsel takes them more seriously. Just my 2 cents.

[/quote]


On a U4, you have to declare any and all settlements that have been made with creditors in the last 10 years.  Did your situation end up on your U4, and if it didn’t, then why didn’t it?  It seems to me that you ended up with two settlements.

The issue goes beyond whether or not you feel they changed the game mid
stream.  Wirehouses, and banks for that matter, change their comp
pretty much annually.  This is nothing new.  In almost 20
years I have yet to see a change so drastic in 1 year time period that
is would so negatively effect a rep they could not survive.  There
have been a few cases where a rep had an poor book structure (say 90%
in UIT’s) and the firm stops the UIT business (that happened at ML a
few years back).  Generally speaking a well rounded business can
handle these changes because they usually take it from one area but
give it to another area (say big bonuses on new large accounts, along
with a reduced pay-out on smaller accounts~again a ML example). 
Such changes are usually in line with real growth of the advisors
practice and serves the firms bottom line the best (look at MER stock
over the las 5 years).



Not a personal shot at Dividend or anyone else, but we are adults and
to we must go in and exit with dignity and honesty.  A "tactic"
involving bankrupt attorneys and offering $.50 on the dollar may
work…but that does not make them right.   In the whole
grand scheme of things good things happen to people that walk the right
way and deep down we all know what that is. And the size and assets of
the firm that loaned you this money means nothing in that context.

[quote=rightway]Not a personal shot at Dividend or anyone else, but we are adults and
to we must go in and exit with dignity and honesty.

[/quote]

None taken. 

[quote=mktsystms] On a U4, you have to declare any and all settlements that have been made with creditors in the last 10 years.  Did your situation end up on your U4, and if it didn’t, then why didn’t it?  It seems to me that you ended up with two settlements.
[/quote]

Firms are looking at 3 items: quality of your business, whether you have any customer complaints and your credit report (liens, judgements and bankruptcies). If those items are clean, then you’ll have no trouble getting an offer.

[quote=rightway] A "tactic"
involving bankrupt attorneys and offering $.50 on the dollar may
work…but that does not make them right.

[/quote]

And it doesn’t make them wrong either. When Apple Computer settled with the Beatles record label, did it make Apple a “bad” company?  When Research in Motion settled with NTP, did it make them irresponsible businessmen?  Settlements and negotiations are a normal and acceptable practice in business, politics and law.

NASD arbitrations are a rigged playing field.  In order to level the playing field, you need to find the best representation you can. It affords you the necessary leverage to reach a compromise that makes both sides equally uncomfortable.

[quote=skeedaddy2]

[quote=mktsystms] On a U4, you have to declare any and all settlements that have been made with creditors in the last 10 years.  Did your situation end up on your U4, and if it didn’t, then why didn’t it?  It seems to me that you ended up with two settlements.
[/quote]

Firms are looking at 3 items: quality of your business, whether you have any customer complaints and your credit report (liens, judgements and bankruptcies). If those items are clean, then you’ll have no trouble getting an offer.
[/quote]

On the U4, item number 14k, subsection (1) states:  "Within the last 10 years, have you made a compromise with creditors, filed a bankruptcy petition, or been subject of an involuntary bankruptcy petition."

It’s a yes-no answer.  It doesn’t differentiate between a bankruptcy or a settlement with creditors.  It remains on your record for 10 years.  Furthermore, it’s a public record.  Anyone can go to the NASD website and see it.  It’s definitely not a good impression to make with clients (potential or actual,)  and you’re stuck with that public record for 10 years.

I’ve heard the same thing about your tax return being on the public record and available to view. I guess you need to know exactly where to look though.  Can you share a link where you can see a broker’s U-4 on the NASD website?  I went earlier today and only found Broker Check where you can see a history of employment and a whether or not you’ve been the subject of a disclosure event:

Types of Disclosure information include, but are not limited to:

This discussion reminds me of an incident my neighbor had last year.  He’s a very stable guy, married for 12 years and has had two jobs in the last 18 years; one for 10 and one for 8.

He accidentally cut off a driver as he was pulling into his driveway and the other driver drove onto my friends driveway and got out of his car. My neighbor is a baseball fanatic and his son plays on two leagues.  Feeling threatened, he pulled out a baseball bat from his backseat and rushed the other guy.  The other guy got back into his car and called 911. 

The police came and filed a report and a trial was set.  The judge let him off if he completed some community service hours and attended anger management classes.

My question here is: If my friend decides to pursue a career as a broker, do you think he should disclose that he was involved in a criminal event?  If yes, than you think this incident proves that he is  unqualified to perform well as a broker? Do you think the branch manager would be concerned that my friend would put a baseball bat to his head someday?

Bill, as always, thanks for your expert opinion. However, putting quotations around the word friend wasn’t necessary. Hiding behind an “I have a friend” story on an anonymous board isn’t my style.

[quote=rrbdlawyer]Let’s not lose sight of how stupidly violent our world has become.[/quote]

I agree. Did you see the violence surrounding the release of the Sony PS3 today?  It’s nice to see us Americans focusing on the important stuff. Right?