Cutting 4th and 5th quintiles (ex-trainee/newb)

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Mar 30, 2009 10:18 pm

If a firm cuts trainees of any quintile and salaried FAAs, that’s one thing.

In the past, have firms cut 4th and 5th quintiles in branch who were earning their own money (meaning, off salary), perhaps dependent on LOS?  (i.e. >10y LOS with under 500M in production)  


Mar 30, 2009 10:46 pm

if thats supposed to be a question vs. a thought than the answer is yes.

Mar 31, 2009 8:17 pm

How has this been historically done? 

I'm not in the area where I'm under any sort of gun, I'm just curious...I am thinking it will happen at my firm (SB) before too long--first cut all the trainees, then newbies, and then start moving up through the quintiles. 
Mar 31, 2009 8:20 pm

Q4 and 5 are never safe, except in late 90’s. Today if you are a Q5 you are all but gone. Q4 is holding the door for you and will meet you at the local pub.

Mar 31, 2009 10:37 pm

What about newbies in first year in 2nd or 3rd quintile?

Apr 1, 2009 12:10 am

the 4s and 5s will be let go very soon (as soon as they hit 6 to 12 mos)

then YOU become a 4th 5th quintile. your safest course of action to survive this bear market if your a new Fa is get on a team or bring in constant net new money (500k a month)

Apr 20, 2009 2:11 pm


Apr 20, 2009 8:04 pm

Great article today in Forbes… speaking exactly to what happens when you keep cutting the 4th and 5th quintile and don’t train and develop the future

<span =“artsectiontitle”>Recruiting
<span =“mainarttitle”>Help Wanted: Advisors Under 50
<span =“mainartauthor”>Joshua Lipton, <span =“mainartdate”>04.20.09,
6:30 PM ET

wave after wave of layoffs hit the financial firms, there is one
financial job that just can’t attract enough applicants to fill the
openings: financial adviser or broker. According to industry insiders
and consultants, nobody wants to be a stockbroker these days. According
to Cerulli Associates, nearly half of all financial advisers today are
over 50 years old. And that aging talent pool isn’t being replenished
with young blood: Less than 5%, or just 15,000, of the 298,000 U.S.
advisers are currently 30 years old or younger, according to Cerulli

"Long term, this will definitely kill us," says Fusion Advisor Network's Philip Palaveev of the dearth of young-blood flowing into the business. "When this wave of advisers over 50 years old tries to retire, how will we absorb the clients that they leave behind."

All this seems counterintuitive given that there has never been a more pressing need for financial advice. More than 70 million baby boomers are in "pre-retirement" according to T. Rowe Price, and given the recent bear market, many simply don't have enough saved to carry them through the golden years.

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Why aren't young people being attracted to financial advice?

Scott Smith, a senior analyst at Cerulli, attributes the shortage of young advisers to several factors. For one, there continues to be a general lack of awareness about the business, Smith says. A lot of high school and college students aren't aware of what financial advisers do, exactly, or even that the profession exists.

There's also a reputational problem, made worse by the recent financial crisis. Given that financial firms like Merrill Lynch, Citigroup, AIG and other "Wall Street" firms are being blamed for current financial woes and laying off people in droves, the prospect of starting a career as a "broker"or "financial adviser" holds little interest for most young people.

Moreover, many are turned off by the prospect of cold-calling and selling for a living. Still a bigger reason is the shrinking number of training programs.

"The training programs are no longer around," says Howard Diamond, managing director of executive search firm Diamond Consultants. Indeed Merrill lynch slashed its financial consultant training program in January. Morgan Stanley and UBS have largely done away with their broker training programs as well.

Schwab, which caters to independent advisory firms as a custodian, actively supports advisers once in the business and when they transition from wirehouse to independent advisory. Unfortunately, it does little to bring new blood into financial adviser ranks.

Luckily, some universities have been stepping in to fill the void. There are now about 100 university financial planning programs across the country, including at schools like Kansas State University, Virginia Tech and Texas Tech, where students take classes on retirement planning, risk management, estate planning, tax law and the latest planning technology.

The students graduate prepared to take their certified financial planner exams. Starting salaries are usually between $50,000 and $60,000.

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What can young financial advisers expect once they get certified and land at an advisory firm?

Jon Yankee is co-founder of Reston, Va.-based Fox, Joss & Yankee, a financial planning firm with $200 million in assets under management. Yankee's firm has hired two young advisers, both of whom had completed M.B.A.s and their Certificates of Financial Planning designations. These associates, both still in their 20s, now help prepare for client meetings, providing support to more senior members of the small firm.

"We involve our associates in everything we do," says Yankee. "Many of the clients now call associates with basic service issues. The partners then don't have to spend time on paperwork. Instead, we can spend time speaking to clients and addressing the issues that concern them."

There are currently about 175 undergraduates enrolled in Texas Tech's financial planning program, says associate professor Deena Katz. Typically, she says, students find work right away. But today. she says the school is having a tougher time placing its graduates in jobs because of industry cutbacks. But the need for these young advisers is greater than ever, she says. The profession needs to attract new talent if it's going to meet and satisfy the growing demand for financial advisers.

"We don't have enough financial planners to handle all the baby boomers," Katz says. "They will all need advice. They can't do it on their own. It is way too complicated, and they have now been way too devastated. They aren't prepared for retirement. So this is a huge opportunity for kids. It's one of the best-kept secrets."

Apr 21, 2009 5:28 pm

If only the most challenging aspect of this business were the financial planning aspect.  It isn’t.  It’s finding and landing new prospects and accounts.
It’s easier to train a good salesperson how to be an FA, than the other way around. 

Apr 21, 2009 7:28 pm

I understand cutting FAs who fall back or drop down into lower quintiles. What makes no sense, especially given the gray hair problem in the business is cutting training programs and FAs just graduating like has been the case at ML and UBS recently. Morgan did this a few years back and the result was record deals being paid to lure in bigger producers. Musical chairs vs. growing your own so to speak. 

Apr 22, 2009 8:03 am

Morgan did this a few years back and the result was record deals being paid to lure in bigger producers.  

  Writing big checks to bring in big producers wasn't the "result" of cutting trainees. The only connection between writing those checks and firing trainees is that both efforts raised the average production per FA at the firm. That's the key metric of a brokerage firm these days. The fact is no one's found a magic formula that increases the survival and success rates of trainees to a significant level. It's still "throw a bunch against the wall and see which ones stick". Where as writing checks to recruit successful FAs is a high probablity route to increasing average production.
Apr 22, 2009 8:18 am

I think this industry will have a serious shortfall in about 3-5 years.