Please help with this odd situation

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Mar 20, 2008 4:15 pm

I have decided to switch careers and go into the wealth management industry.  I have spent the last 7 year in corporate finance, and had some success.  I was a controller at a fortune 200 company, and now I am a director of finance at a small start-up.  But I just really want to get out of the Sox’s environment and have more freedom in my career. Since I was in high school wealth management was the career I really wanted, but I decided to get a good foundation in accounting. 

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I have been offered an opportunity to help my new career along that I need some advice on.  A close family member has just came into about 200Million in cash. (Large sell of an internet business) and he wants me to be involved in the management of his money.  With my limited wealth management knowledge I know that I can not do this on my own.  So we are going to look for a wealth management firm that is willing to take on his account and hire me as protégé’ to help manage his account.  I would hope that the experienced wealth manager would be willing to teach, develop, and train me to be a great financial advisor.  I also have about 50 Million from other people that would like to invest with me.  30 Million Is guaranteed, the other 20 Million in probably about 50% that I could close those accounts.   I know this is hard to believe, but it is true.

So my questions are:

Do you think an experienced wealth manager would take me on if I could bring him these account? What type of compensation structure should I look for?  Salary for the base 200 Million and a % of fees on the other 50 Million? What are some things I should look for in an experience wealth manger?

Any advice would be great thanks

Mar 20, 2008 5:29 pm

This is a pretty unusal situation. That is a lot of assets, for most Financial Advisors.

The first question, whether a wealth manager will take you on, the answer is yes. You will find someone.  I am from the wirehosue environment, (Merrill, SB, etc) so I will speak from that perspective. There are also independent FA's and I am sure you will get replies from their perspective as well.   It seems to me that if you want to make this your business, and you would consider a wirehouse, you should get into a good training program (my feeling is SB (i am with SB) AND ML have the best, although I hear Morgan Stanley is coming on). Learn the business in a structured environment. You will get a salary from the firm for the first two years. It wont be great, but if you can really bring in the assets you are talking about, it wont matter. The problem is that if you did so (got thru the 6 months of training), on your own, you will most likely still not be equipped to do a good job of providing necessary solutions to the level of client you are talking about. So, maybe the answer is to go thru the training (about 6 months) and while you are doing so, get to know some advisors in your branch. Hopefully by the time you are in production, you will be comfortable enough with one of them to approach them about a strategic partnership. What I mean by this is you will partner with them on specific accounts, as opposed to partnering with them on your and thier respective businesses overall. At that time you would ask for guidance from your Branch Manager on what type of split makes sense. That is if you trust your BM. It seems to me you are bringing a lot to the table. Experience, good contacts, and ability to bring in assets.   One thing you need to know, and this is important. In this business, you are in sales. Yes you help people manage wealth, but you need to be good at selling (yourself and your value) or you wont have wealth to manage. I have seen many people come in thinking they were going to be portfolio managers, and they all flame out. Real fast.   As far as what to look for, obviously you need to have some basis for feeling there is a lot of integrity. Competency, i.e. CFP designation, etc. and a good knowledge of the firms resources so they know how to bring solutions to High Net Worth clients.  Ask about their process for discovery, investment management and bringing solutions. All the good ones have a process. The rest are just brokers.   This business is the best in the world, and if you have the kinds of solid contacts that you seem to say you have, you should jump right in. I am an Assistant Branch Manager, and I will tell you if you came to me and I could get a good feeling this is all real, and you came off as intelligent and driven, I would jump all over it. I am not going to mention my location, because I dont want to give the impression that I am prospecting here, for new people, OR assets.   Last thing: My PERSONAL opinion, and I could be totally off, because I have limited knowledge of the resources available thru LPL and other independent Broker/Dealers, my personal opinion is that you would be better off at a wirehouse, at least as a start. Reason; training structure, deep wealth management resources, ongoing professional development. There are drawbacks, such as the independents pay better (payout of commissions) and more freedom on a lot of different levels. But I think, especially for the situation you describe, wirehouse is the right thing for you. At least to start.   Again, full disclosure, I have limited knowledge and respect the opinions of folks like Joedabroker, Indyone, etc who may disagree, and have a different perspective. Good luck    
Mar 20, 2008 5:37 pm

Thank you that was great. 

Mar 20, 2008 5:51 pm

KTM - In my experience the business when run at its best is about resolving people’s financial concerns & managing the managers of people’s money - portfolio managers have the Harvard, Wharton, Kellogg pedigree’s, experience running money & good instincts. These are skills honed over time & after making a lot of mistakes. I’m not sure if you want to make the kinds of mistakes with your friend’s and family’s money that it will take to run money yourself.

I’m not sure if this is a problem, though.

What do you believe is the reason that these people want you to manage their money? I’d bet it’s something that they like in you rather than your wealth management experience. As pratoman said this is about sales. It’s about putting people at ease & making them feel like their involved with the right investments at the right times. It’s also about helping them avoid stupid mistakes. The conversations it takes to do this are sometimes uncomfortable when delivered by a stranger. When delivered by a friend, they’re just the regular old back and forth banter.

If I were you I would shop these accounts to a family office or multi-family office who can be real wealth managers & bring you on board for the reason or reasons these folks want you involved.

I’d like to say that you’re one lucky &%(*(, but I know that you’ve worked hard to get to where you are. You’re starting at the endgame of this business. You don’t need training on how to be a salesperson or on investments. You need to sit down with your friends and say, hey, I’m gonna help you go where you want to go in life, I’ll tell it you how it is because I’m not one of them, and then I’ll use one of them to make sure we’re in the right stuff at the right time & out of the wrong stuff when we need to be. Who else do you know I ought to be talking to, also?

Mar 20, 2008 5:59 pm

That is a good point one thing we thought about is hiring a good wealth management professional and setting up a family office.   Then making it into a firm that we could grow with other clients.

Mar 20, 2008 6:22 pm

He sold the bussiness for more then 200M.  The amount that needs managed is 200M, the 30 is real form another source, and the 20 would be made up of about 10 different accounts.

  I wold love to do this on my own but i have no experiences i need some help.  What would be a fair split with some one on this money?
Mar 20, 2008 6:24 pm

I will take you under our wing for 25% of all fees.  You can leave whenever you want and take your clients too.

Mar 20, 2008 6:32 pm

Snaggle thank for the offer.....

But in all reality how much in fees would this be.   I figure on the 200M -about 750k-1M a year on the 50M maybe $250K-350K   Would this be in the ball park?
Mar 20, 2008 6:34 pm

I’d do some research on & like websites for the compensation stuff.

On $200MM if you make .25% that’s $500K. .1% is $200K.

Mar 20, 2008 8:58 pm

Prato, Ash, and Ice, these are some of the best, most helpful posts I have ever seen on this forum.  Thanks for posting.

Mar 20, 2008 9:30 pm

you should go to Edward Jones. They are used to working with people with BIG money and sophisticated investors.

Mar 20, 2008 9:37 pm

oh, we had a great thread going until 830pm with more damn Jones stuff. C’mon!

Mar 21, 2008 9:40 am


Snaggle thank for the offer.....

But in all reality how much in fees would this be.   I figure on the 200M -about 750k-1M a year on the 50M maybe $250K-350K   Would this be in the ball park?[/quote]   In reality, you are going to need 75bps-100bps (.75% - 1.0%).  You can't just consider the fees.  You also have to consider that there will need to be supports staff to pay, B/D fees (depending on what avenue you ultimately choose), overhead, etc.  You will be doing more for this guy than just managing his investments.   KT, this is a very complex situation.  Rarely, if ever, does someone come from outside the industry with 200mm+ ready to manage.  Typically, you choose your B/D, get licensed, learn the biz, eat Ramen Noodles for a while, and finally start growing your book.   I think, if you need to do this relatively soon, you have two choices: 1. Go to a wirehouse, get trained, get the certs, etc.  As part of this, you get brought onto an experienced wealth management team where you will bring them 200mm+ to help manage.  The agreement, IN WRITING, is that should you leave, those assets go with you.   2. Find a large established indy firm or RIA that specializes in true wealth management.  I'm not talking an office with two advisors and a secretary.  A real wealth management firm, with resources, experience, and significant AUM that proves they can manage serious HNW individuals.  I didn't catch where you lived, but I am assuming it is CA (I think you said internet startup?).  If so, you should be OK with this.  If you live in Idaho, you might have a little more trouble finding the right firm.    Keep in mind, there is a big difference between managing $1mm or $5mm or even $10mm accounts, versus managing $200mm accounts.  The needs of those clients are different.  When you have $200mm, the entire focus of your wealth is different.  You aren't thinking about retirement planning and how to ladder some muni bonds.  It goes WAY beyond that.  There are serious risk, estate and tax planning issues to consider, as well as philanthropy.  You NEED to have a firm with serious wealth management resources.  My personal opinion is that you should not try to set up your own family office at this point.  You do not have the experience, and though you could hire a qualified advisor to run the money, I think it is much more comlpex an issue than that.   KT, for what it's worth, my background is almost identical to yours (OK, minus the part about finding $200mm to manage!).  I came to this industry for primarily the same reasons as you.  Now, my path is obviously FAR different (I am at Jones, which certainly isn't the place for your situation), but having worked with UHNW individuals in my prior career (commercial real estate finance & hotel deals), I had the opportunity to experience firsthand what the needs of the seriously wealthy are.  We're talking real estate, boats, planes, private equity, all kinds of things that make life more complex.  These guys bought and sold hotels and commercial real estate like we consider buying washers and dryers.  Just be smart and surround yourself with very experienced people, not just very experienced brokers.   You might consider this: there are lists (I think Registered Rep and some other sites have these) that show the top wirehouse brokers and the top indy brokers (and RIA's maybe) in terms of AUM.  The top ones are into the billions.  You might take a look at that list, see who is in your area, and set up a meeting just to talk.  Those are the guys you need to be talking to, not us here in the chat rooms.
Mar 21, 2008 9:57 am
Mar 21, 2008 12:25 pm

Hi, are you a woman or a man? I would like to talk with you privately if you are a woman and what it is like to be in the securities industry and where I think you will have the most success. Private Message me

Mar 21, 2008 12:37 pm

I’m sorry i’m a man.

Mar 21, 2008 7:35 pm

Don’t apologize for being a man!!! 

Mar 21, 2008 7:59 pm

Moneymom - with all due respect, considering all the lunatics I have seen on this forum over time, your post has potential to do serious damage to this thread.

  More seriously, Joeda, understand your comment, as I said in my post, my knowledge of the indie channel is somewhat limited.
Mar 21, 2008 8:09 pm

There is no chance you can justify charging your relative even .75.  That is insane.  I believe .5 would be above market for an account that size.

  You are proably looking at .25.    I think your best bet is to find and partner with an experienced advisor who would bring in a similar amount of revenue and go in this with shared ownership of the firm.    If you get an excellent advisor starting the new firm will be a minor issue.    This eliminates all of the problems associated with salary and the worry of a firm that you just get trained then leave down the road.   Good luck.