100k minimums-what the heck?

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lady_trader's picture
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I am re-introducing myself so that I can qualify my question.
I am a midwest, Fixed Income Trader. I have about 9 years experience in financial services field, mostly doing the selling TO licensed reps. I am looking to transition into a career for an FA.
I am noticing this big push in the industry to only take clients with a minimum of 100k. It does seem to be a wirehouse or firm who does HNW qualifier. So, please tell me, how does one find this type of investor? Do you cold call? Does the reputation of your firm connect you with this type of person? What is it?
I am just curious because this would seem to be difficult for a newbie to obtain initially. Also, I notice only about 15-20% of the reps that I work with have accounts in the six digit worth, and I do a more HNW product.
So, what's everyone's thoughts?

bluestar's picture
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Joined: 2004-12-14

The money is out there, you just need to find the right channel to find them.  Cold calling is one ineffective method, but it's free so most newbie do that.  You can place ads in publications that rich people read, you can join clubs with members who are rich people; but that takes a little investment.
Will the firm help an FA?  That depends on the firm I guess.  But there is no free lunch; that much I know.
$100K is not that high a requirement in the FA business.  Below it, diversification begins to get difficult and perhaps expensive too.
You also have to consider how much time you have.  It takes just a little more time to service a $5 mil account than a $100K account.  You can service at the max about 40-50 clients.  So you want to eventually focus your effort on the big guys, not the small ones.
I remember a few years back Stan O'Neil set a policy to take only $1mil and above account, and ML profit soared.  Something to think about.
 

troll's picture
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Joined: 2004-11-29

lady_trader wrote:
I am re-introducing myself so that I can qualify my question.
I am a midwest, Fixed Income Trader. I have about 9 years experience in financial services field, mostly doing the selling TO licensed reps. I am looking to transition into a career for an FA.
I am noticing this big push in the industry to only take clients with a minimum of 100k. It does seem to be a wirehouse or firm who does HNW qualifier. So, please tell me, how does one find this type of investor? Do you cold call? Does the reputation of your firm connect you with this type of person? What is it?
I am just curious because this would seem to be difficult for a newbie to obtain initially. Also, I notice only about 15-20% of the reps that I work with have accounts in the six digit worth, and I do a more HNW product.
So, what's everyone's thoughts?

Did someone tell you that $100,000 was a lot of money?

lady_trader's picture
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Bobby-
Yeah, I do think a 100k is a lot of money, especially for a new person for a new account. For "investable assets", it definately is. (At least in my book.)
 
 
 

FreeLunch's picture
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Lady_trader.
My advice would be to go after the 401k rollover market.  People aged 55+
For the most part, all of these accounts should be over $100,000.
Position yourself as someone who wants to help people manage ALL of their assets.
Don't focus on selling product (for example, don't cold call trying to sell $25k of a muni), rather focus on trying to review peoples portfolio and managing most of their assets.
BH is right, $100,000 is not that much for people ages 55+ when talking about their IRA 401k.  But like I said, if you market yourself as someone who manages peoples entire portfoilo of investments, you should find the accounts will generally be $100,000 +
Good Luck.  Whether you cold call, network, advertise, or whatever best suits you, it is achievable any way.

troll's picture
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lady_trader wrote:
Bobby-
Yeah, I do think a 100k is a lot of money, especially for a new person for a new account. For "investable assets", it definately is. (At least in my book.)
 
 
 

Sounds like your "book" is more like a pamphlet.

san fran broker's picture
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Joined: 2006-02-25

You cannot survive at a wirehouse (at its payouts and standards) and be looking to open ANY accounts at less than $100k.
In this part of the country, you are expected to be prospecting for accounts that are $500k+ exclusively in your first years. Then the move should be to only accounts that are $1 million+. Most brokers need to have a book that is over $50 million at 5 years in order to be kept on in a branch. This is why the failure rate is so high.
Although, all of this is in a managed money / financial planning world, so if you're talking about insurance or loaded products, then it's probably ok to prospect for small accounts. However, this is not what most people have in mind when they think of a "financial advisor" career.
Unlike being a wealth or pure money manager, being in consultative sales (insurance, financial products, mortgages, real estate) really is a numbers business - if you can increase one number (cold calls, referrals, etc) you can decrease another (assets, commissions, etc). Figure out what numbers that you're averaging (i.e so many dials lead to so many connects lead to so many sales) and determine how many sales you need to make in order to meet your numbers. Don't listen to what the firm tells you - figure out what your numbers are. Then work that hard. Don't expect that your numbers will be as good as the guy next to you - figure out what your numbers are.
In many cases - even in wirehouses - the best model is to combine both strategies. Generally speaking, even the best salesmen will not make enough money (how ever hard you work) trying to become people's financial advisor at the very beginning of your career. The immediate payoff is too low. People who start out building exclusively managed money businesses tend to starve in their first few years. It really isn't until your 4 or so year with a client that you will make more than you would have expected to selling them into an A share. Managed money and financial planning are about recurring revenue and building trust and a relationship with clients. While being a financial advisor is a much better job, these things take time. My guess is that most rookies (and sales managers) don't have that kind of patience.
So my recommendation to most rookies is to do both. Prospect and sell differently for different types of clients - sell A shares (commission products) to the people for whom they are most appropriate (smaller accounts, affluent people with simple needs) and become the true financial advisor (recurring revenue programs) to those clients who need one. This will keep food on the table in the short term, while you build a book for the long haul.
Sounds hard to do both? It is. But, I think that rookie financial advisors should expect to work 60-80 hours a week minimum in their first three years. They should be highly organized and have complete tunnel vision. Everything they do should be about their business (where you eat, where you work out, etc). When you aren't prospecting, you should be servicing existing clients; When you aren't servicing your clients, you should be studying for the CFP or CFA. When you do actually have fun - where you should be doing it with people with money. 
But, if you are smart and committed, within 5-7 years, you will have built a beautifully annuitized business and either have or be well on the way to the lifestyle you've always wanted. And then you can spend your free time writing article - length postings on message boards.

lady_trader's picture
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Free Lunch and San Fran-
I have been researching this site and I notice that both of you provide articulate, constructive responses.  It is appreciated 
I like both of your recommendations: 1) Going after 401k rolls and 2) Balancing financial advice and doing commission-based work.
Thank you.
 

Dust Bunny's picture
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Joined: 2007-05-07

As an independent with a long standing client base, most of my accounts are over 100K....way over.  I'm not forced to a minimum account size by my B/D.  It is more cost and time efficent to manage fewer large accounts than many small accounts.
But I still will occaisonally open up smaller accounts.  In fact many of my larger accounts were opened with a small to mid size IRA or a child's custodial account.  When clients give you some money to manage, they are not going to immediately hand over the entire bankroll.  They are testing the water to see how you perform.     If you do well and give personal service then they will bring you more AND referr you to their friends and family.
I do have the advantage of being able to decline smaller accounts, a luxury that a new broker doesn't have, because of my length in the business. 
To answer your question of how to find high net worth people and since we are both "old ladies", I suggest you network with and do educational presentations for women's groups such as American University Women, Soroptomists, other clubs that consist of retired or near retiring wealthy women.  In my area that is the art guilds, symphony supporters, garden clubs.  They are always looking for presentations and I have found that  1. they have money 2. they will be interested in working with a woman 3. they are independent thinking and progressive people.

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oops I thought I was responding to old ladies post.   You may be younger than me, I apologize for calling you "old". 
 
Nevertheless the women's networking advice still stands.

lady_trader's picture
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Dust Bunny-
Hehe...I am in my early 30's. I loved your post though. Especially the garden clubs-right up my alley I think you have posted before that you and your husband do the classic car crowd as well? Right this minute, my husband is working on restoring a 1968 Camaro.
You answered my original question, however. Not being experienced, I was thinking that someone might give a newbie a small account like an UTMA to see if they could handle a larger account one day.
Thank you for responding.

troll's picture
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Joined: 2004-11-29

lady_trader wrote:
Dust Bunny-
Hehe...I am in my early 30's. I loved your post though. Especially the garden clubs-right up my alley I think you have posted before that you and your husband do the classic car crowd as well? Right this minute, my husband is working on restoring a 1968 Camaro.
You answered my original question, however. Not being experienced, I was thinking that someone might give a newbie a small account like an UTMA to see if they could handle a larger account one day.
Thank you for responding.

You are getting some great advice on this thread. One thing I have to say about networking (actually 2 things)
1. It's someting you should definately be doing from the start, wish I had someone give me that advice when I was new.
2. It takes a year or two to bear fruit, most of the time.
The reason I bring up number two is that if you are in a wirehouse as a new FA, there will be a lot of contradiction thrown at you. Mainly they all want you and expect you to build a fee based business, based on financial planning, relationships, trust, etc. and at the same time, they give you numbers that you need to hit in, like 10 minutes! Hard to do both.
I would take all comers when you first start out, but once you get the small ones in, put them in something that is appropriate for them, but pays you now, and doesnt take a lot of maintenance. Spend you time on the 200k+ households. Thats where you annuitize, help them plan, build relationships, and clone them.

Dust Bunny's picture
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lady_trader wrote:
Dust Bunny-
Hehe...I am in my early 30's. I loved your post though. Especially the garden clubs-right up my alley I think you have posted before that you and your husband do the classic car crowd as well? Right this minute, my husband is working on restoring a 1968 Camaro.
You answered my original question, however. Not being experienced, I was thinking that someone might give a newbie a small account like an UTMA to see if they could handle a larger account one day.
Thank you for responding.

Oh yes. The classic car/hot rod car club is also a great way to network and meet people with discretionary spending.   If you can afford a $5000 paint job on your Goat, you've got bucks.  Plus, it's a lot of fun.
My dream car... when I win the lottery ..... 1949 Buick Roadmaster Convertible...sigh.   http://www.buickstreet.com/49buickstreet.html  I defy anyone to say that isn't a gorgeous car.
In the beginning don't worry about the size of the account, unless your B/D will can you if.   It's all about the potential of the account.   Kind of a meat/motion thing

troll's picture
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Joined: 2004-11-29

Dust Bunny wrote:lady_trader wrote:
Dust Bunny-
Hehe...I am in my early 30's. I loved your post though. Especially the garden clubs-right up my alley I think you have posted before that you and your husband do the classic car crowd as well? Right this minute, my husband is working on restoring a 1968 Camaro.
You answered my original question, however. Not being experienced, I was thinking that someone might give a newbie a small account like an UTMA to see if they could handle a larger account one day.
Thank you for responding.

Oh yes. The classic car/hot rod car club is also a great way to network and meet people with discretionary spending.   If you can afford a $5000 paint job on your Goat, you've got bucks.  Plus, it's a lot of fun.
My dream car... when I win the lottery ..... 1949 Buick Roadmaster Convertible...sigh.   http://www.buickstreet.com/49buickstreet.html  I defy anyone to say that isn't a gorgeous car.
In the beginning don't worry about the size of the account, unless your B/D will can you if.   It's all about the potential of the account.   Kind of a meat/motion thing That's mighty nice, but I prefer to set my sights on something a little more contemporary: http://www.porsche.com/usa/models/911/911-carrera-cabriolet/ gallery/If I get that call from Publisher's Clearinghouse tomorrow, I'm off to the dealership!

lady_trader's picture
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Dust Bunny- that is one BEAUTIFUL car
Joedabrokrkr-When I paste your link, "the file isn't found". However, I know my horse-powered obsessed husband wouldn't mind a Porsche in his garage.
Pratoman-Seems like I need to start networking seriously. Thank you for your solid advice.
 

troll's picture
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Dust Bunny wrote:lady_trader wrote:
Kind of a meat/motion thing

Why do you set yourself up like this?

troll's picture
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lady_trader wrote:Dust Bunny- that is one BEAUTIFUL car
Joedabrokrkr-When I paste your link, "the file isn't found". However, I know my horse-powered obsessed husband wouldn't mind a Porsche in his garage.
Pratoman-Seems like I need to start networking seriously. Thank you for your solid advice.
 Try this one: http://www.porsche.com/usa/models/911/911-carrera-cabriolet/ gallery/#I managed to truncate the other one by a few characters.

brokerman's picture
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Joined: 2006-03-29

under 50k G it up.
Over 50k Fee it up.

Indyone's picture
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troll's picture
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Indyone wrote:http://www.porsche.com/usa/models/911/911-carrera-cabriolet/
Joe...you suck at posting links...Apparently so!

opie's picture
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FreeLunch wrote:
Don't focus on selling product (for example, don't cold call trying to sell $25k of a muni), rather focus on trying to review peoples portfolio and managing most of their assets.

There are many who would disagree strongly with this comment.

Dust Bunny's picture
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Bobby Hull wrote:Dust Bunny wrote:lady_trader wrote:
Kind of a meat/motion thing

Why do you set yourself up like this?

Same reason you do.

pretzelhead's picture
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Joined: 2007-03-23

lady_trader wrote:
Bobby-
Yeah, I do think a 100k is a lot of money, especially for a new person for a new account. For "investable assets", it definately is. (At least in my book.)
lady T-
Bobby is right.   Most FAs at the big wires like Mer, MS, UBS, etc have minimums of at least $250.  I know Merrill won't even pay on accts less than 100k unless you household them together with others to bump the household over 100k... and I am sure they'll fix that glitch soon.
In order to make it in this biz, you need BIG dollars under management.  Think about it-- A 100k account will only pay you $350 per year (assuming you have them in c shares at 1% and your grid is 35%).  for the amount of time you'll need to give these people, is it worth it for $350?  You going to spend more than and hour or two with them? 
You need to break down just what your time is worth.
 

pretzelhead's picture
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Joined: 2007-03-23

pretzelhead wrote:lady_trader wrote:
Bobby-
Yeah, I do think a 100k is a lot of money, especially for a new person for a new account. For "investable assets", it definately is. (At least in my book.)
lady T-
Bobby is right.   Most FAs at the big wires like Mer, MS, UBS, etc have minimums of at least $250.  I know Merrill won't even pay on accts less than 100k unless you household them together with others to bump the household over 100k... and I am sure they'll fix that glitch soon.
In order to make it in this biz, you need BIG dollars under management.  Think about it-- A 100k account will only pay you $350 per year (assuming you have them in c shares at 1% and your grid is 35%).  for the amount of time you'll need to give these people, is it worth it for $350?  You going to spend more than and hour or two with them? 
You need to break down just what your time is worth.
 

Arrrrrrrrrgh sorry folks, I just read San Fran's post and see that I provided a similar, yet less articulate resonse.  My bad.
 

troll's picture
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Joined: 2004-11-29

Dust Bunny!
What the Heck was that scam you sent us to?
Planet Wealth!!!
Was the Roadmaster some sort of nudge nudge wink wink to get ust to look at a "Nothing Down, Timeshare Vaction Home" sort of "financial Independence for just pennies a day?
Mean while it DID go to show that there are PLENTY of ways to prospect in a Niche Market that are available out there.
I don't really think that you intended to hype Planet Wealth, it just so happened that way.

Dust Bunny's picture
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What the Heck was that scam you sent us to?
Planet Wealth!!!
 
???? The link takes me to a web site for Buick collectors???
http://www.buickstreet.com/49buickstreet.html
Try it again.  You must see this car.

Dust Bunny's picture
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Ah I see what you mean. 
 I never scrolled down past the pictures of the car.

troll's picture
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Dust Bunny wrote:
What the Heck was that scam you sent us to?
Planet Wealth!!!
 
???? The link takes me to a web site for Buick collectors???
http://www.buickstreet.com/49buickstreet.html
Try it again.  You must see this car.

I'm with Babs. I also have a fondness for cars that were built in the year of my birth.

troll's picture
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See? I didn't think you intended to send us there, but it is apropos to the discussion don't you think?
Actually, when I got down there I was thinking that that would be a great place for an ad... low and behold, synchronicity took a firm grasp of the steering wheel (as it were).

Vin Diesel's picture
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Joined: 2007-04-18

You are getting some great advice on this thread. One thing I have to say about networking (actually 2 things)
1. It's someting you should definately be doing from the start, wish I had someone give me that advice when I was new.
2. It takes a year or two to bear fruit, most of the time.
The reason I bring up number two is that if you are in a wirehouse as a new FA, there will be a lot of contradiction thrown at you. Mainly they all want you and expect you to build a fee based business, based on financial planning, relationships, trust, etc. and at the same time, they give you numbers that you need to hit in, like 10 minutes! Hard to do both.
I would take all comers when you first start out, but once you get the small ones in, put them in something that is appropriate for them, but pays you now, and doesnt take a lot of maintenance. Spend you time on the 200k+ households. Thats where you annuitize, help them plan, build relationships, and clone them.

very well said.
wirehouse's get new fa's to build books in fee based accounts, then those guys don't generate enough commission to keep their jobs. those accounts then get handed to top producers in that office.
you should segment your new accounts.
$100k - $500k upfront commish
$500k + wrap/fee based
 

BondGuy's picture
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Joined: 2006-09-21

San Fran's post hits the nail on the head. You need to walk before you can run. You need to get immediate traction or it's game over.
Vin's post also speaks a truth about this business. The suits will tell you one thing and expect another. I call this suit disease. Unfortunately it systemic in most large companies, based in the fact that the average suit never had to build a practice.
The truth is anyone just starting out needs to get off the ground quickly. To me that means dialing the phone. Networking, as good as it is, will not build quickly enough. Though networking should be included as a primary prospecting channel, it shouldn't be exclusive.
Other biz building ideas, not to be used as an only marketing channel:
Once a week luncheon meeting with 5 or 6 seats open for guests. Nice restaurant, someplace locals want to go. Your job is to fill the seats and then deliver an informal presentation during lunch. Everyone who eats is a prospect who you will call for an appointment. Over the course of a year you will feed about 300 people, spend about $12,000, and with a 10% close rate open 30 new accounts. Your qualifying should put the minimum account at $250,000 bringing the total new asset count to about $7,500,000 minimum. Get propects to the lunch via cold calling businesses within 5 miles of the restaurant or by mailing invitation to them. Better yet hire someone to get them there for you and free up your time for appointments and closing.
Start an in the office series of classes. Make it a three week series and cover all the bases. You don't even have to feed 'em. It works something like this: Every week there are three classes scheduled. As prospects complete one class they move to the next, the next week. After three weeks the prospect has completed all three classes and is ready for their in depth financial review. They've had a three week look-see and you've had three weeks to sell yourself. Your job is to fill the 5 or 6 seats available in the beginner class every week and then move them thru the process. As above, expected result 7 to 12 mil a year.
Personally, as good as these ideas may be, and I know they're good, nothing beats just calling someone up and pitching a product. I know it's ugly, but it's exactly how all the largest producers became the largest producers. They asked someone to buy something. After that happened they used their seat at the table to build a relationship with the client eventually morphing from product salesman to financial advisor. That's the way the big dogs did it, regardless of what the suits tell you. Nothing beats the good old appeal to greed pitch. Find something with outstanding performance and pitch it to everyone! See what that does to your prospecting numbers.
 
 

lady_trader's picture
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Joined: 2007-05-12

Bond Guy-so are you telling me that I need even more cash saved up to "take the jump" to afford lunch money? Thank you. I have noticed on a few other posts that you have that you recommended First Trust UIT's. I could pitch that. Thank you for the advice.
Vin Diesel, Bluestar, pratoman, brokerman, and anyone else who I thoughtless missed:  I want to make sure that you know that I am grateful for the time that you take to post your thoughts. It really does help me Thanks.
 

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