How should I interpret this advice

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Oct 6, 2005 10:46 am

In my year in the business I've almost solely used a mutual fund wrap program to build my business.   6m aum approm so far.

My mgr. gave me some advice that I should be using some other products because not many brokers can make it selling one product.

My wrap program has so many different combinations that I don't view it as one product.

I do plan on offering some LTC once my practice matures somewhat.

How would you interpret this situation?

Thanks in advance for any feedback.


Oct 6, 2005 3:06 pm


I personally think he is right.  Are you not getting in front of substantial net worth clients?  Because if you are, you ABSOLUTELY should be moving beyond wrap account mutual funds.

I know you don't think annuities for equity exposure are a good investment, which I disagree, but even so, their are many other asset types.

Why aren't you using SMA's, which wouldn't have any embedded capital gains taxes AND can be customized to the client (one example of many: A UPS exec with a million or two probably doesn't need any more exposure in UPS, or that sector for the matter).

What about REITs?  Beheringer Harvard is yeilding 7% monthly in its REIT I, plus you can take depreciation on assets and pay tax on 5% rather than 7%.

What about life insurance, for protection to a family or for estate purposes?

Do you have a series 3?  You should be doing some commodity futures MF's in larger accounts to reduce overall portfolio correlation.

I could go on and on...but the bottom line is your four or five or six models isn't adequate, and even if you do get the account, you are doing your clients a disservice by not presenting them with other available options that could be beneficial.

Oct 6, 2005 3:28 pm
I am in a blue collar/low to moderate income area No access to REIT'S however we do have some real estate funds SMA's available but i'm unsure if they would benefit my clientele since their liquid net worths are fairly moderate We cannot sell term insurance at this juncture...we do have access to a few whole life products No series 3
Oct 6, 2005 3:30 pm

being relatively new to this i'm just focusing on gathering assets and forging relationships at this point.

As my book gets bigger my goal is to expand my own product offerings which includes LTC

Oct 6, 2005 3:40 pm


I understand.  I guess my point is just don't use one solution (MF wrap) to fill all needs.  Trust me, I am in the same boat, trying to build a business.  Just remember, people don't remember returns nearly as clearly as they remember losses.

Good luck.

Oct 6, 2005 3:48 pm

thanks for the feedback.

I realize the way i'm building my biz I will lose some short sighted clientele.   Since those are my expectations when it does happen it won't make me to disappointed.

I am trying to do what is right and that is all my clients can ask for.

Oct 6, 2005 11:18 pm


What I believe your manager is trying to tell you is that building a fee-based business takes time and meanwhile, most reps that try to do solely fee-based from the start, starve before they get sufficient AUM and flame out.  Guess who benefits from the recurring revs at that point?

I think your mgr has your best interests at heart and wants to see you make it.  Otherwise, he/she probably wouldn't have bothered saying anything, let you flame out, and scoop up the accounts you left behind.

I too, prefer fee-based, but keep an open mind.  I had a new customer last week that had a substandard VA with a good-size embedded gain (it happens...particularly when they've been in them for 10-15 years).  Dropped a $215K ticket, took home $8,000 and will get $2,000 in residuals each year.  Client has a much better VA with better sub accounts and death benefits and a four-year surrender, while preserving his unrealized gains.  Just an example of what you can do to diversify your business.  There are also plenty of people that would rather pay by the transaction.  Not everyone wants fee-based...explain the differences and let them choose...your business will be automatically diversified.

Nothing wrong with focusing on fee-based, but try branching out and see if it doesn't help you do an even better overall job for your clients...

Oct 7, 2005 12:09 am

Thanks Indy for the advice.

I have heard from a few of my colleagues that there is a chance that I can build this fee based business over the next few years and then my manager could recruit a new broker promising my territory to this new recruit.   In effect I would have built this business for someone else.

I imagine this would be a worse case scenario for me but I would imagine anything is possible.

Would this make any sense for any party involved?

Oct 7, 2005 11:28 pm

I think your manager is telling you politely to start producing.  Start doing something that pays and still increases your annuitized business.  A good example would be uits that pay 2.2% and rollover every 15 months paying you 1.3%  Some of these have pretty good returns. 

Oct 8, 2005 9:11 am

Are you at a bank?  You’re lucky enough to have clients coming to you.  Be happy with that.

Oct 8, 2005 12:29 pm


yes, I'm with a bank program.

I am very happy here.

My attitude differs from most of my colleagues though.    I view this career as a "practice" as opposed to a job.    Building my practice will take time as this is a marathon and not a sprint.

I would rather build relationships than do transactions.

Have a good wknd.

Oct 8, 2005 1:04 pm

Scrim - It is the age old dilema, fee vs. transaction. I agree with what you are trying to do. Slow and steady wins the race. You can screw yourself just as easily taking upfront comish, as you could annuitizing. I will say that taking upfront/larger payouts  - can be very motivating. Building a trail business, you never feel like your accomplishing anything…until that magical day, when you are grossing $25,000 month before you talk to anyone. It is a painful way to build a book. Most of the guys I know who are in the business 10-15 years, took the upfront pay initially, then converted to fee based. (Not so painful) I think if the banks got the SPANKING they so very… very… greatly deserve, they too would see things more your way.

Oct 14, 2005 8:09 am


If you are in a Bank it seems to me that you would have access to a lot
of older clients with money sitting in CDs, why not sell them some
individual bonds… tax free or otherwise.  They earn more on
their money and you get a nice 2-3% commision every several years when
they are called or come due.  There is nothing like being in the
business for 5-10 years and then coming in and having a couple hundred
thousand dollars in bonds that are comming due each month that have to
be reinvested.  So I have been told!  I haven’t been out
nearly long enough to experience that yet.

Oct 14, 2005 8:10 am

Also, just because you don’t like annuities, doesn’t mean that you
clients won’t.  Sometimes you have to sell them what THEY want,
not what YOU want.  If you aren’t selling your clients annuities
then someone else is!

Oct 14, 2005 9:06 am

It would seem to me your managers comments could be one of two things and both depend on your relationship with him/her?

If you have a healthy relationship the manager may mean expand your service line for more profit. I would think you could politly inform all of your fund clients that you also offer more services including insurance, VA's and other investments. If you have a strong relationship with them I would suspect they would appreciate your diverse offering.

If the relationship is new or not very good with manager. Its possible he wants you to generate more income on your 6+ million in AUM.

This advice could be viewed as both good or bad. If you are doing well financially and you feel good at the end of day then keep on doing what your doing. If your customers are happy and they plan on being with you long term then great. Now if the manager starts acting up then you need to inform him of your long term relationship building plan. I would think he would understand, but you never know.