Lpl bond platform
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[quote=BondGuy]
[quote=rightway][quote=joedabrkr]Bonds are not a
large part of my business. In general, though, I haven’t found it
to be a problem. Don’t forget that if you’re at a wire, that
trader is probably putting a point or two in that bond that he has in
inventory for you.
[/quote]
Not at Merrill! No
mark ups at the bond desk Our muni inventory is our own, plus we show
multiple firms and there prices, so we can buy them and see no mark
up. (very few peopel know this).
[/quote]
Wrong, your desk is marking the bonds up and not showing this to you. Merrill, as with all the wires, operate their bond trading desks as profit centers. UBS was putting two points on some bonds, actually most bonds. All, the wires, as with all the regionals, own their own inventory. This is actually one of the reasons for the markup. It cost money to carry the inventory. Plus the costs of repricing the bonds if the market moves away from them. Usually they don't have to reprice because some noob will solve their problem for them, but it's still a cost. Add in profit, on which most of your trader's income is based, and their is plenty of markup on wirehouse bonds. The trader's job is to turn a profit trading bonds for the house. With the wires there is a built in supply of FA buyers. And, by the way, they could care less if they screw your client. Which is why you need to care.
[/quote]Not quite in my case Bondguy. I buy the bonds from a separate inventory/desk (separate from the non-advisory retail reps) when placing them in accounts (my accounts are advisory accounts where I act as portfolio manager). These bonds are not allowed to be marked by the firm (or more obviously, me). Joe was right. In these accounts we do act as a Fiduciary and can only profit from the fee's I charge based on assets, not from marking anything. To your point on price movement with inventory you are right, but remember our inventory is much smaller because it serves a much smaller group of reps. We also get to play with money managers if there is not something we need in the inventory, institutional prices and they fall under the same rules as me. In addition, I cannot buy IPO's, buy or hold any ML proprietary products (this would be a conflict of interest), and am subject to far more scrutiny than a typical retail rep.
Sorry for all of the confusion folks!
o.k. enough with bonds already. Jeez!!!
Here's an idea for you.
If the topic is of no interest to you, don't look at it.
MSRB = Full Disclosure. It is fairly easy for me to find out what the dealer-to-dealer markups are on just about any bond. It is actually quite interesting when a retail client is being told they are getting institutional pricing when I can clearly see the markups between 2 different profit centers on the same bond.
"It is actually quite interesting when a retail client is being told they are getting institutional pricing when I can clearly see the markups between 2 different profit centers on the same bond."
That's a DIFFERENT Institution the guy is referring to.
It's more like "If you buy this bond, you should be institutionalized!"
Or, "I need you to buy this bond because my daughter is entering the institution of marriage, at $300 a head!"
No but seriously folk, are you going to tell us how we can see the markups or are we supposed to be content that you can see them?
Wirehouses get block pricing on bonds, and mark them up even though it
appears to you as par. Then you mark it up more, if you want. An offer
credit may be .25, when the wirehouse already made 200 bps, I think as
someone stated.
Ask any institutional bond trader in your respective offices, if you have
one, and they will tell you how sh*tty their payout is on $1M bond trades.
Indy brokers get way more payout on the exact same annuities as
wirehouse brokers too. Wirehouses skim some off the top and hide it
from the broker. Joe can probably vouch for this 100-200 bps
discrepancy.
BTW - I don’t lock people up in long term bonds in a rising interest rate
enviroment, when I can get 5.5-7 percent monthly income in top-quartile
bond funds. Maybe when interest rates go up another few points, I’ll start
buying individual bonds again. Every once and a while, there’s a good
agency step-up, etc. MARS/MARPS are great too if you want to make zero
profit.
[quote=Whomitmayconcer]
It’s more like “If you buy this bond, you should be institutionalized!”
[/quote]Hence the benefit of bond ETF’s. With BND you get the whole Lehman
Aggregate of IG bonds for 11bp, a tight spread on the shares, and
instant liquidity as needed.
All we need is a muni ETF and then buying single bonds will be mostly obsolete (except for speculation and defeasance).
Whoever started this forum - one way to find out how competitive the pricing is compared to where you are now is have the recruiter you are working with and you compare pricing. That is, pull up your current offerings and compare them to the prices at LPL. I am good friends with an advisor that joined LPL in my area a few years after I did who was at UBS. He told me during his visit to the home office, he had the UBS bond desk on the phone and was comparing the prices of the bonds there to what LPL was offering. HE claims that about 60% of the time LPL had the same or better price. To me, it seems like the only way to know for sure.
I am not sure if this helps to answer the question, but I would like to post an educational response.
Most desks, especially wirehouses, do inventory. If they inventory, they do put in a mark. Generally, the mark will be greater depending on the maturity. To correct an earlier post, however, they are normally NOT 2 points. (This is $20 per bond. A short term bond would be like $1.25 per bond.)
If anyone ever wants to know if they are "in the market" for a muni or corporate, I would suggest going to investinginbonds.com and typing in your cusip to see what last prices are. The info. is a little fuzzy. (It doesn't tell buying vs selling.)
Hope this helps.
1)In an account that is a wrap account, there can be no mark up by Bond desk or rep, period.
2) LPL guy- how about ask to see some offerings on some bonds from their desk and compare it to www.investingbonds.com. It will tell you if your firm is in-line.
3) Bonds can be great products. One thing that I notice is that the producers who sell bonds generally have higher net worth clients. Also, if you compare bonds to bond funds, generally the client has less commission overall paid out.
Just some thoughts.