Building a fee based business pitfalls

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Oct 7, 2005 4:16 am

In building my fee based business using mainly a MF wrap program I've been told by a few of my colleagues that there is a possible pitfall I need to be aware of that they've seen before.

Imagine this scenario:

In a few years let's suppose I have 20 AUM fee based assets generating approximately 300k/yr in trails.   A recruiting manager recruits a superstar rep from another firm and promises him the territory I currently cover with my fee based accounts.     Hence, I am asked to move my territory to somewhere else and lose all of the relationships I have forged.     I am pretty much forced to start all over.

How realistic is this scenario?   Does it make much business sense for any parties involved?

Thanks in advance for your constructive feedback.


Oct 7, 2005 11:36 am

Ahhhhhh  the fun of working in a bank program…

For those that have been around a while may know this is exactly what
the management at my former bank did.  Your give up territory or

It is a very real risk in a bank.

Oct 7, 2005 7:16 pm

Anytime someone else controls you (i.e., employer/employee relationship), about anything legal is possible.  My guess is that as long as management likes what you are doing, this is not likely, but as with rightway, it is certainly possible, depending upon the bank's agenda.

My advice to you is to always have a contingency plan lined up in your back pocket, and to take a look at the &^!%$^%$#!^&# non-compete/non-solicit that you signed and see what the provision are.  If things start looking grim, it's time to have an attorney look at it and start planning for a possible exit.

For now, do your thing and keep this bright thought in mind...there's always the possibility of sailing your own ship by going indy.  It's frankly the most fun I've ever had in this business...good luck...

Oct 10, 2005 6:33 pm

I’ve been with the bank for 2 years now. I have never seen or heard the above happening no matter what kind of trouble the broker is in or how disliked he is by the manager. B.S.

Oct 10, 2005 8:43 pm

Oh I believe that it’s happened.  Unless you’re willing to call Rightway a liar, it sounds like he’s a case in point.  Again, anytime someone else controls you (i.e., employer/employee relationship), about anything legal is possible, whether it’s likely or not.

Oct 10, 2005 10:47 pm

Pretend for a moment you are running the bank program.  Your
leverage, leverage over the reps and the bank Sr. management, is the
branch referral sources.  As a rep builds a business, especially
fee based, and becomes more independent they represent risk to your

    ***They are larger producers that can demand more and be more difficult to manage.

    ***They represent a disproportionate amount of the
revenue, more difficult to replace should they leave or die.

    ***They have a control over both clients and branches that is too far away from managements touch.

    ***Other reps in the program respect them more than management.

The list could go on.  In time they (big producers) take this
feeling of self controlled destiny, and in the years it took to get
their they got an education on just how out of touch the management
really is with the ground level business.  And they begin to talk
with other reps at awards ceremonies over a cocktail about the reality
of the business, and it is a different picture than management
paints.  This creates a bunch of reps with their own minds, and
this does not fit real well in your program…you have less and less
control over your program, and eventually it breaks down.

I am not making this up.  Banks have learned this lesson, so
instead, you build your bank program with a population of reps that
rely on the you and the branches you provide them.  As a rep grows
towards being a large producer, which takes far more than 2 years EZ,
you see the risk of the above happenening… so you stop it by “Rearraning
territories;  Making room for another producer coming in;  We
are looking for more production out of that branch; Your doing so well
with your clients we want  you to focus on that by giving up a
branch and taking a higher pay-out; etc etc etc.”  The
result is that your program is full of good poeple that need what your
provide  so they fall in line and when one quits, they are easily
replaced…pretty good business model if you ask me. 

Trust me, its real and it sucks for those of you who want to exceed the $1 million mark.

Oct 11, 2005 4:47 am


I agree that the banks might rearrange territories or pull branches.  I know of one person that lost some branches at my bank, but he wasn't a big producer by any stretch (middle of the pack on the production lists).  They took his branches because the branch managers didn't particularly like him.

But actually taking a broker's clients!  That I have never heard of, and I have friends at other banks that have been around for awhile.  Do you actually know of a case where a broker had clients taken from him?

Oct 11, 2005 12:57 pm

I know where the reps were given choices… give up branches or
clients.  You are not seeing alot of this right now because things
may be slower and reps are not growing as fast.  Just keep your
eyes open.

Oct 11, 2005 3:30 pm


our program is similar to what you describe.   

Once our business hits some kind of critical mass we are encouraged to give up most of our branches and simply work our books and client referrals in exchange for a higher payout.

In the long run this arrangement should work for all parties in theory.