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May 25, 2008 11:16 pm

Has anyone left EJ and went to a wirehouse ? I would be curious as to any comments you may have as I am being recruited pretty heavily.

May 27, 2008 2:39 pm

I have known a few.  My experience was that most of them were rather disappointed.  I have seen more satisfaction from EDJ guys going indy rather than to a wirehouse.  I think the only time it makes sense is if you are really trying to swim upstream with your client base (yes, I know we all are).  Some of the wires carry more "panache" and upscale services compared to Jones.  The guys I have known were disappointed because the front money ended up being less impactful than imagined (due to taxes, holdback, forgivable over time, etc.), and they seemed to have to deal with more politics. 

I think everyone's situation is going to be unique, though.  In some situations, it may be the right thing to do.  But I would not do it just for the front money.  Make sure you know what you are getting into.  With Indy, you have more control over what you get into.

May 27, 2008 3:10 pm

One of the more difficult things about the Jones model is the isolation. I've always been a team-oriented person and often find myself wishing I had other "teammates" to help tow the line, offer encouragement, ideas, specialties, etc. (Sure, I realize we can always call other folks in our region, but there's so much account stealing that goes on, it's difficult to trust anyone who's chasing the same dollar as I.)

To dovetail off of this thread, and hopefully not hijack it, I'm interested in knowing about how a team works at a wirehouse? The concept is fascinating to me, but I can't imagine how compensation could be arranged equitably among a group of 5-6, or more, folks.   Do some of the members spend time with portfolio construction/research/monitoring (my personal favorites) and some on prospecting and servicing clients?   Anyone...anyone...anyone?
May 27, 2008 4:53 pm
Borker- I agree with you 100%.  On one hand, I really would like working in a team environment.  It gives you a nice kick in the pants when you need it, multiple "good ideas", a sounding board, multiple skill sets, multiple contact points for clients, and basically some comradery.  On the other hand, I don't know that I have met someone that I am willing to give up some commissions to yet.  I think it would have to be the right setup to work.  But that is one of the few things about Jones that bothers me - no option for teams.   Ice- I think that only happens on very large teams, where you have several advisors, and several support staff.  Those "top" wirehouse producers that are in the $billions are the leaders are very large teams (like 18-25 people), where they would have someone doing the investment research, etc.  The "stars" focus strictly on prospecting/client communication.
May 27, 2008 5:00 pm

I have been with EJ for sometime, and have always been recruited, but this is the first time I’ve really listened. I do not see the MF wrap as very customizable, and I had really been looking forward to it. It really looks like a cookie cutter approach with a few funds you can replace in the same asset class. I see this as no way to help provide “alpha” for clients. There would be no way to customize based on where we are in the investment cycle. In some ways it seems buy/hold and rebalanced quarterly and with as long as it took to change Putnam, I guess I question if we are really willing to make the necessary changes .

I always understood being conservative, but we’ve talked about financial planning for 10 years and still do not have access to the Monty Carlo calculations. The asset allocation models have only been adjusted in the last few years and for a company that wants to compete with the big boys, we still never have an opinion on the market, the economy, or even on some of the bonds we sold until its almost too late. Sorry for the vent, I just don’t understand if we are ever going to be nothing more than a sales organization rather than helping people manage money. Thus I have been listening for the first time.

May 27, 2008 5:06 pm


May 27, 2008 6:27 pm
"To dovetail off of this thread, and hopefully not hijack it, I'm interested in knowing about how a team works at a wirehouse? The concept is fascinating to me, but I can't imagine how compensation could be arranged equitably among a group of 5-6, or more, folks. "   Basically, you can establish the roles and responsibilities however you see fit (the good news).  The tough part is that it is difficult to meld successful FA types into a well-oiled machine.  It can and is done all the time, but many people fail to realize all the dynamics going in that have to be VERY well thought out.  I think this is a clear benefit to indy or wire over EJ---if explained correctly a client they wonder why they ever had their entire fate in on person's hands....especially when those hands were once used to knock on their door (I am a reformed doornknocker, so yes I know it works to start out).
May 27, 2008 10:26 pm

In regards to “Teams” , I have 2 friends at other firms that are part of a team. One has a “Hierarchal” team in that he is the Chief, and the others have different roles plus all still service accounts. He has 5 other FA’s with him and 2 assistants that are licensed. The split is 70/30 on old business and 50/50 on all new business. They do about 2.8 million.

The other team is built on strengths, one FA is designated to do nothing but look for new business, one does most of the closing of business and proposals, one provides client contact and service and the other trades and monitors portfolios. They are successful and bring in alot of new assets and do about the same production as the first. Equal split on new business.

I can definitely see the synergy…but it has to be well defined and organized. Still someone still has to lead as I see it. It does sound intriguing.

May 28, 2008 2:59 pm

“Has anyone left EJ and went to a wirehouse ? I would be curious as to any comments you may have as I am being recruited pretty heavily.”

  I would still be interested on people's thoughts on this.  I have been recruited in the past by ML, and have never really taken it seriously.  Just curious on other's thoughts.

May 28, 2008 4:23 pm

It’s my opinion that they are the true “wealth managers” in the investment industry; the folks who are taken most seriously when it comes to handling HNW and UHNW investors.

  However, my impression of a wirehouse environment (giving to me by none other than the Green Machine) is that of a boiler-room-type setting where selling is far more important than taking care of clients' needs.   I picture the BOM storming up and down the halls making sure everyone in the office has a telephone in their hand.
May 28, 2008 10:55 pm

I left EJ and went to Smith Barney almost two years ago. Best thing I ever did in my life.

  Jones does not get the team concept or the reality of what practice management should be. Opening 2000 accounts in 900 households where every dime of revenue is transactional  is no way to run a business. It's actually downright silly. Not to mention all the crap they forcefeed you....but anyway...I am grateful to them for giving me an in to the business. It just wasn't for me to stay.   Incidentally, I formed a team with two other advisors a year ago and it has been difficult but very rewarding on a personal and professional level.   Being on a team with the right mix of people allows you to really focus on what you do best. My role on the team is the Financial Planning Specialist. I am studying for the CFP and it is my role on the team to run the plans (financial,retirement, estate) and look for planning opportunities. The other two do more of the prospecting/ asset gathering and our skill sets all complement each other.   Production versus what we were doing as individuals is up 35% YOY in a difficult market. Can't wait for a good market.   My BOM is great. There is a heavy emphasis on building a fee-based business but absolutely no pressure to sell anything you don't want to. There IS significant pressure to produce. If you are not doing $400K a wirehouse is no place for you. The grid will gut you and the front money is a fool's paradise (Imputed loan interest and large tax checks to be written once a year).   If you are happy doing $500k at Jones and making $200k, that's fine. If you want to go to an environment that gives you all of the tools to be a $2MM producer, there is a reason most of those types of guys work at the wirehouses and are not indy or at Jones.   It's the platform, baby.   Rock!
May 28, 2008 11:12 pm

BTW, the client is always always first. Don't buy the Green Machine's hype that they are the only ones in the industry that do what's right for the client. It's all part of their brainwashing regimen.

And yes, the wirehouses have a lot more clout with the HNW and UHNW. It's because we have EVERYTHING. That was the most eye opening thing to me when I moved. Just how plain vanilla and streamlined Jones has made their business model. Which, by the way, is "Let's get 3 points on every dime that comes through this place and only sell funds that give us revenue sharing." I'll never forget a regional meeting where the regional leader was trying to do a session on how to run a stock portfolio and the GP in attendance called him out for not talking mutual funds instead--in front of everybody.

Pay no attention to the GP behind the curtain.   :) 
May 28, 2008 11:18 pm


May 30, 2008 2:58 pm

I looked at wirehouses before going indie. Here were the questions I really had to ask. The answers are different for each of them. What kind of customer do I want to serve? What kind of service and support do I need or want? Is there someone I could partner with in my area either wirehouse or indy? If I partnered what would be my role? What role would I want and what strengths would compliment each other? After all that what kind of costs and comp does this mean? Will my clients move based on the relationship I have with them? Will this improve their future and mine? What happens if we seperate the practice/team or if one of the partners retires or dies?

A lot of people wake up to the fact that they want more for their clients at EDJ. Then they realize that maybe the grass is greener. If you have truly built and advisor relationship with the client then you are probably ready to leave no matter what. At the same time there are a lot of Jonesers that need to stay there because they are good salesman not advisors. Regardless, it will take a solid year to decide, plan the move, make the move and transition your base. Make sure you are financially ready to do that without the big money promise so that your decisions are not clouded.

May 30, 2008 3:36 pm

As I stated in the past, I was recruited by Smith Barney in 05 and 06.  I was still in the brainwashed mode in 05 with the green machine and scoffed at the thought of going to the lowly Smith Barney.  As my attitude was turning, I recontacted the BOM in 06 to look at the opportunity.  An office of  7 advisors, with the youngest (at that time) was 53 years old.  They all had been with the firm 15 plus years (I guess from Shearson?).  The BOM was needing to set up the next generation of Advisors to transition the vets.  I met with the BOM several times, at breakfast, at the office.  I met f to f with a Vet in the office to discuss SB.  I was offered 1.5 Trailing upfront with an equal amount of stock based on a vesting schedule contingent on the % of clients came with.  If 50% came, then 50% of my upfront would be matched with stock, vesting over 5 years.  THis program would have been in place, If I remember correctly, the first 18 months. 

  The lure to me at the time was the age of the Vets.  BOM said they had 1.5 billion under management in the office and was looking for younger advisors to get started and hopefully work with a Vet or two in the office to transition.  After long thought process I declined the offer for a couple of reasons.  1. I would have had to travel to another city for an office and with a young child to attend to, made it more of a challenge.  2. I was totally scarred of the LARGE wirehouse enviroment.  As I made my way around the office to meet the other Advisors, they just seemed so much more polished and more professional than I was used to, which intimidated me. 3.  Noone smiled in the office and I believe there was a very competitive aura in the office..which made me uncomfortable.    Ulitimately, I made the move to LPL and happy I did.  I'm not sure what Rockstar means by Indy's not having the platform, buy I think I can provide a very in depth relationship with anyone who comes into my office.  I will say that there is a huge opportunity, in my mind, within  a veteran wirehouse office.  Lots of assets needing a place to transition.  If I was to do it all over again, I would definately seek out SB, MS or Merrill to start with for the training and the opportunity, but of course, transition to the indy side.. 
Jun 1, 2008 11:36 am

My input if interested… I had a good run at Jones. I hit profitability and location gain within the first nine months. I then went to a wire for 7 plus years. You need to ask yourself what do you want to be. Every team I saw at the wire failed to be a team three years later. Once you join a team your clients become the teams clients. If you don’t have any clients that a good thing. Plan for the worst and hope for the best. If you leave the wire and your teammates will be happy to call your former clients and assure them that the remaining team will take care of them and that in a good faith gesture they will cut the fees for the next year if they stay with the team. (And why wouldn’t they stay you told your clients how great your teammates are.) You get the picture.   I learned a lot at the wire but I regret I didn’t go independent sooner. You greatest value is the client relationships you have and your ability to create new relationships. You can build your own team at an independent practice. I have a good friend at LPL who has a team of 4 people working full time for him. He’s grossing just over a mil. At a wire he would be lucky at his numbers to have a full time assistant to himself.

Up front money is fools gold. I got a check when I joined the wire. My first $10k of gross every month covered my imputed interest and taxes on that check. I had a five year note. Now they typically go for nine years! On bad months I had pay checks for $0.00. I just went indy and could sell my practice now for close to 600K based on current rules of thumb. That would be taxed at a cap gain rate of 15% not as ordinary income.   I was offered 700K at from MS. In real dollar value cut it in half.

One last thought: “If you aren’t the lead dog the view is alway the same”

Jun 1, 2008 11:52 am

  That would be taxed at a cap gain rate of 15% not as ordinary income.   

  I'm interested in what research you've done or what you base that statement on. I've pondered how most FA Practice sale transactions are really taxed. Do you assume the buyer considers it a capital investment then and not a business expense?   (Thinking from a buyer's point of view here).
Jun 1, 2008 12:10 pm

I base the statement from what my CPA told me. I was also told the same thing from people at Finet, RJ and LPL. As far as how the buyer records the expense I’m not sure how they should record the expense. I will ask my CPA next week. I would like to know myself because I hope to buy out some other practices in the future.

Jun 1, 2008 7:26 pm

If you can, let me know what you find out. I am wondering if it would work as a capital sale/purchase on a long term earnout arrangement with split revenue as opposed to a one-time transaction, which is generally not the smoothest way to do it.


Jun 2, 2008 9:16 am

They are often longer-term earn-outs.  This protects both the buyer and the client (keeps the seller motivated and in-the-game for a while).  And often the buyer doesn’t have the cash to pony up to buy it outright.  The exception is sometimes the larger wealth management practices, which may do it it one time (they have the $ resources), but with the contractual agreeement that the previous team stay on for X amount of time (often there is a holdback or incentive).