Client Reviews

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rippey26's picture
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Please help me with ideas/formats for running "A client reviews". It seems to me I only end up talking returns and I would like to not focus on that exclusively.   I'm fairly new to the business and I would like ideas on how to keep my best clients? Please advise.

rightway's picture
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What firm are you with?

san fran broker's picture
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rippey26 wrote:Please help me with ideas/formats for running "A client reviews". It seems to me I only end up talking returns and I would like to not focus on that exclusively.   I'm fairly new to the business and I would like ideas on how to keep my best clients? Please advise.
Client reviews should follow a fairly basic structure, and should effectively "drill" down and across a clients' financial needs.
It is best to develop an Investment Policy Statement for the client.
A basic agenda format:
1. Introduction
2. New information (has anything happened since our last meeting, is our data on your outside accounts [401k, etc.].
3. Review of the capital markets since last meeting
4. Review of the client's asset allocation
5. Review of client's individual investments
6. Performance of client's investments (If client underperformed; why? Is the problem something that is likely to reverse itself.)
7. Firms' view of the capital markets going forward, recommendations for client's portfolio.
8. Credit and Lending (how is client borrowing, do better alternatives exist?)
9. Estate planning: Is client's estate plan up to date? Is gifting and college planning on track?
10. Insurance: How is client's insurance coverage?
11. Are there any next steps
12. Schedule follow up meeting.

ChrisB's picture
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Good informatio San Fran, Thanks :)

Knows Wall St.'s picture
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I agree, that's a good outline of what needs to be covered--I suggest that you're on thin ice talking about estate planning unless you know your stuff.
Question.
Is it the same idea regardless of how many dollars the client has invested as part of your AUM?
If it's not it should be.
So, why does a guy with $2,000,000 invested with you pay so much more for essentially the same service than a guy with $200,000 invested with you?
It seems to verify, "You can fool some of the people all of the time, and all of the people some of the time, but you can't fool all the people all the time" doesn't it?
 

anonymous's picture
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I always start by reviewing the client's goals and objectives.  Meetings have to be about the client and not the client's investments.  The investments are just a means to an end.
All decisions are based upon what the client is trying to accomplish.  Have the goals and objectives changed since the last meeting?

babbling looney's picture
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Yes very good SF Broker.  
The review shouldn't be you lecturing the client on the performance of their accounts.  By beginning with what's new, what has changed in the client's life and letting them talk you will uncover all sorts of new needs and directions that you may want to go.
For example in a what's new since our last meeting with a client I discovered that he and another family member have inherited a rather large piece of commercial property that they plan to manage together.   This led to the discussion of how to structure a legal partnership/llc or other entity to protect his interests in the property and other estate planning issues, a referral to an attorney that I network with and a proposal for a buy/sell agreement that will be funded with two insurance policies, that I am writing on the two principles.  While discussing this we also found a need for other insurance for estate planning as it appears they will be inheriting many more properties in other States.
If I had only gone over the performance of his portfolio and left it at that....I would not have gleaned all this other information.  Sometimes the clients think that all we do is investments.  If we want to keep them, we have to show that we are counselors in many other areas of their financial lives.  My client was pleasantly surprised and grateful that I was able to help him solve this issue and that I even offered life insurance.

Knows Wall St.'s picture
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Do you spent ten times as long on a client who has ten times as much money as another client?

babbling looney's picture
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I "spent" as much time as it takes to get the job done.  I treat all my clients with respect.
You never know who is hiding big assets from you or will eventually inherit or marry into money. You also don't know who they are talking to about you after they have met with you.  Sure some client's don't generate much income and take up some time, but the positive PR is invaluable, especially in a smaller town where I live.  It all balances out.

Knows Wall St.'s picture
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babbling looney wrote:
You never know who is hiding big assets from you or will eventually inherit or marry into money. You also don't know who they are talking to about you after they have met with you.  Sure some client's don't generate much income and take up some time, but the positive PR is invaluable, especially in a smaller town where I live.  It all balances out.

I understand, but you're being evasive.
Do you believe that a client who represents $10,000,000 of your AUM is being fairly charged if he pays you significantly more than a client who repesents $100,000 of your AUM?

BankFC's picture
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NASD,
Shut up.  Your an idiot.  Does a real estate agent put a million dollar house on a different MLS than the $100,000 houses?  No, and yet the real estate agent's fee is still 6% (or whatever they happen to charge).  You could always do FSBO, right?  Why doesn't everyone do that?
Is it any more difficult (expertise required) to build a $500,000 house versus a $200,000 house?  No, and yet the builder's markup could very well be identical. Why not sub out all the work yourself, and save the builder's markup?
If someone is so inclined, absolutely they could open a Scottrade account and handle all their own financial matters with out paying annual fee (I know I would).
And yet, I just had a meeting two weeks ago with a gentleman very well versed in both the financial markets and real estate, with over 10 million LIQUID net worth (over 15mm total), and he found value in working with not one but three financial advisors/institutions (he shared that it was nice to get frames of reference when offered something).  By the way, I am proposing on 2.5mm of that this week...
The fact is not everyone is so inclined to sit in front of their computer and trage GOOG options all day.  It is a SERVICE (not a neccessity), like many others each and very day, for which they pay a fee.
 

BankFC's picture
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In a perfect communistic world, everyone would be paid the same for everything, everyone would work equally as hard for everyone else's benefit, and all would be peachy.
That world doesn't exist.
This is a capitalistic, free economy.  That $10,000,000 client has every right in the world to pay whatever fee is offered to him, whether it is a broker at ML asking 1.5%, or a discounter asking $7 a trade.  It is their choice, and if they find value in it and choose to pay it, then by all means they are being treated fair.

Knows Wall St.'s picture
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BankFC wrote:
Shut up.  Your an idiot. 

The word is you're not your.  What's with the rage?  Come on now, surely you can deal with hearing somebody say something--right?
The question is not answered by pointing to a real estate agent's commission--that is a one time cost.
Would you like it if every year the real estate agent who sold you your house reaches into your checking account and pulls out 1% of the home's value simply because they sold it to  you.

babbling looney's picture
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Knows Wall St. wrote:BankFC wrote:
Shut up.  Your an idiot. 

The word is you're not your.  What's with the rage?  Come on now, surely you can deal with hearing somebody say something--right?
The question is not answered by pointing to a real estate agent's commission--that is a one time cost.
Would you like it if every year the real estate agent who sold you your house reaches into your checking account and pulls out 1% of the home's value simply because they sold it to  you.

Wow.  That sounds just like our property tax system.  Plus the taxes/fees can be increased by votes on bond issues from people who don't even own property at all.

troll's picture
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Knows Wall St. wrote:Do you spent ten times as long on a client who has ten times as much money as another client?
 
More often than not a client with a large asset base presents more issues and has more needs than those with smaller accounts. I've yet to need to spend time on a complicated investment plan or estate plan with someone who has a small account.
Then again, since you've never done this job, it doesn't surprise me that it escapes you. You really should drift back to sleep and dream about the "good old days" when "real brokers", unlike the kids here, had a list of five stocks that every single client owned. When everything about the job was the next commission, what can I get this guy to buy or sell and where to I insert the sizzle. “Say, Mrs. Smith, wanna earn a quick 25%?”.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Yeah, the "good old days" when, if a client were to ask, "But what about the tax implications of what you're suggesting" the broker would reply "Taxes? I don't know anything about your taxes, Bob. Hell, I don't even know your cost basis. That's not my job". By golly, the good old days when the industry wrote together a commission schedule that everyone was forced to live by. Price fixing at it’s best. Yes, indeedy, THAT’S when the client came first…
 

babbling looney's picture
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Would you like it if every year the real estate agent who sold you your house reaches into your checking account and pulls out 1% of the home's value simply because they sold it to  you.
Ok. Let's go with this analogy.  If I signed a contract with the realtor who sold me my house that entailed them coming in two to three times a year to rearrange the furniture, upgrade appliances, put new paint on the walls and generally increase my property values, then I would have agreed to pay the fee and they can certainly take it from my account.   If I haven't signed a contract and the realtor is billing me or taking money from my account, they get to see me in court.
Do I care that my 3400 square foot house gets a different treatment than my neighbor's  1500 square foot house?.  Maybe I'm getting more visits and different carpeting in other colors.  Maybe I'm getting less frequent appliance upgrades because the quality of the original appliance is still good.  Do I care?  Not as long as I am seeing appreciation in my property value.
If I feel that my negotiated fee with the realtor is too high or that my property is not appreciating as it should, then I will cancel the contract and do my own interior decorating, or hire another person for that service.
This is not hard for anyone to understand.  This is how business and how the real world works.
 

tjc45's picture
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Knows Wall St. wrote:
I agree, that's a good outline of what needs to be covered--I suggest that you're on thin ice talking about estate planning unless you know your stuff.
Question.
Is it the same idea regardless of how many dollars the client has invested as part of your AUM?
If it's not it should be.
So, why does a guy with $2,000,000 invested with you pay so much more for essentially the same service than a guy with $200,000 invested with you?
It seems to verify, "You can fool some of the people all of the time, and all of the people some of the time, but you can't fool all the people all the time" doesn't it?
 

If the average investor could, working part time, educate themselves to level where they outperform the the world's top money managers, how many hours per week would that take? And assuming that they could, working part time online, outperform the smartest money management minds in the world, by how much could they outperform them, half a percent, one percent, how much? And if they could do this, outperform the professionals by a percent, would it be worth it? Aren't there better things to do with life?
There will always be a group of people who devalue our service. Just as there are for every service a group of people who will devalue it. For instance, my brother thinks I'm crazy to have a mechanic work on my car. You will never find my brother at a Jiffy Lube getting the oil in his truck changed. And you will never find a Do-It-Yourselfer financial genius in my office. There is simply no way for me to convey the value proposition that professional money management offers that would be any way acceptable to this person.  The world is full of 30 cents on the dollar types who actually believe their KIA is every bit as good as a Honda, their Azera is every bit as good as a 5 series. These people are not our prospects. We will never reach them.
Maybe, when an investor with 2 million can invest that money anywhere at the same cost as an investor with 1/10th the amount fees will adjust. Generally speaking, within my own book clients with larger portfolios pay at lower fee rate than do the smaller accounts. However, for time intensive accounts the fee is calculated to fit the situation. So, account size isn't the sole determinate of fee. Just part of the equation.
I had to sue an RV manufacturer a few years ago. My lawyer worked the same way. More work equaled higher fee. I recognised the that value and paid him.
Lastly, there is this; Our good buddy, the father of devaluing investment advise and creating mediocre mutual funds, John Bogle, needed of all things, a heart transplant. This guy is the king of the cheap suit philosophy applied to money management. So what do you think he did regarding his heart transplant? Do you think he went the discount route? Do you think he applied his life's view of devaluing professional advise and dialed an 800 number to find a surgeon? And then after summarizing his entire medical history in ten minutes to a clerk, do you think he asked and then took the clerk's advise on which surgeon to use?  Of course he didn't. In fact that sounds ludicrous. Yet, with one life's other important matters, money, it's OK to dial an 800 number, recite the abridged version of your financial situation to a clerk, and then invest your life's saving based on the clerk's advise. Yeah, that's a smart way to go. And to put icing on it, that investor doesn't realize that they are a victim of a very slick marketing campaign that assures them they are doing the right thing. Investing via 800 numbers-equally ludicrous.
That people buy houses along super highways and next to landfills proves that there is a buyer for everything. Without these people Bogle would have faded from the radar screen a long long time ago. PT Barnum said it right.
Cynics on both sides of the aisle.
 
 

Knows Wall St.'s picture
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How can a guy be a good advisor when he doesn't know the difference between advice and advise?

Knows Wall St.'s picture
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I ask again.  Why should an investor pay a middleman 100 or more basis points to do nothing other than combine the figures on year end mutual fund statements into a summary?
Why would somebody with a million dollars not turn $10,000 of it over to an "advisor" to see where they put the money and then simply mirror that allocation with the other $990,000 by buying directly, or through a discount broker?

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Knows Wall St. wrote:How can a guy be a good advisor when he doesn't know the difference between advice and advise?
Now I need my sales assistant to start proof reading my posts.
How about a real answer instead of a cheap shot?

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I'm guessing that not all of the posters here have the time to either run spellcheck or proofread their posts before submitting.  Perhaps they just don't care when it comes down to it.

Knows Wall St.'s picture
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I believe that the average investor is going to wake up one of these days and realize that he's being raped by middlemen who do virtually nothing requiring deep thought.
Very few of today's "Financial Advisors" do anything other than prepare year end reports and--perhaps--rebalance an asset allocation model among a family of funds.
Investors can learn to do that themselves, and I believe that one of these days somebody is going to start advertising that they will do it for you for a flat dollar total rather than a percentage of the assets.
There is no reason why an investor should have to pay more than $100 per month to some guy who dropped out of college and became a financial advisor because he couldn't get the credentials to be a professional golfer and couldn't make enough money surfing.

no idea's picture
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That was pretty weak Newbie. I think tjc laid it out as well as anyone could have. If an investor doesn't want to use an advisor they caertainly don't have to.

Mike Damone's picture
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NWS,
Are you suggesting that financial advisor better start finding new ways to provide value or this line of work will become extinct? <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

troll's picture
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tjc45 wrote:Knows Wall St. wrote:How can a guy be a good advisor when he doesn't know the difference between advice and advise?
Now I need my sales assistant to start proof reading my posts.
How about a real answer instead of a cheap shot?He has far too much time on his hands, and such low self esteem that he compensates by constantly taking potshots at others.  Comes from the deep set knowledge of knowing that he was paid very well for many years to contribute very little to the well-being of others.

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Knows Wall St. wrote:
I ask again.  Why should an investor pay a middleman 100 or more basis points to do nothing other than combine the figures on year end mutual fund statements into a summary?
You are making an assumption that that is all the service the client is getting during a year.  If that were the case, then they shouldn't pay a fee.  However, if the advisor is actively managing the portfolio and providing guidance in other areas as I discussed in my example of the inherited property, then a fee is deserved. 
Why would somebody with a million dollars not turn $10,000 of it over to an "advisor" to see where they put the money and then simply mirror that allocation with the other $990,000 by buying directly, or through a discount broker?
The answer is that there is nothing to stop the client from doing just that. Have at it.  It would be a pretty stupid client who doesn't realize that the management mechanics and the portfolio selections of a 10K account are going to be significantly different than a million dollar account.  There is no way that they could possibly be a mirror of each other.
While we are at it let's discuss the time value of money and the money value of time.  I can change the oil in my car and tune up the engine if I wanted to (I really can do this by the way) but it isn't worth my time to do it.  Instead I hire a mechanic to take care of that task for me.  My time is too valuable.  For someone like yourself who OBVIOUSLY has nothing BUT time you should do the task yourself.  My mechanic who is perfectly capable of researching investments on his own, has me managing his retirement account.  Society is full of trade offs like this.
My question is are you deliberately obtuse or really as stupid as you seem determined to prove yourself to be?  I try to be understanding of your posts since we are about of an age.....you older of course  . However, you are making it very difficult to find anything of value in your writings when you are so persistently ignorant and belligerent.
 
 

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Mike Damone wrote:
NWS,
Are you suggesting that financial advisor better start finding new ways to provide value or this line of work will become extinct? <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

I think so.  I think the day will come very soon when a financial advisor will charge a flat fee--say $100 per month--to be available to a client who may have a question or wish to adjust his portfolio.
My career has been spent looking ahead, trying to decide what will upset the status quo and attempting to get into the mindset of the clients.
I don't buy the idea that investors with significant assets are not bright enough to do what needs to be done to rebalance his portfolio according to a "plan" that he devised with the help of an advisor who charged him $150 per hour for three or four hours.
I believe that in a bull market lots of things are easily overlooked and/or justified.
I also believe that when you're young and working to add to the portfolio it is easy to lose sight of the money being siphoned off in fees--but when you retire you become fixated on maintaining what you have and if somebody has a portfolio worth $1 million they're going to resent thousands of dollars beinig siphoned off for very little "value added."
They'll decide if they fire the middle man they can take a cruise every year with what they save.

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Doesn't Know Anything (especially WallSt.),
Please enlighten the rest of us regarding what will be the catalyst for the sold called "average investor" (and what defines an average investor?) to "wake up?"
As of today, anybody can go sign up at E-Trade, Scottrade, Fidelity, etc and buy no-load funds, stocks and Ishares for as low as $7 or less, buy bonds, and everything in between.
And yet, I haven't lost a client to one of these services yet.  Not even ONE!  None of my collegues have either.  I bet if you could get an accurate poll from advisors all over the US the amount of assets lost to discounters it would be quite minimal.
Surely just before a tsunami there is a trickle...no?
So, again, I ask you:  What will be catalyst behind this great awakening of formerly content brokerage clients, transformed into motivated do-it-yourselfers, and the subsequent catastophic shift of trillions of assets from Merrill Lynch, Goldman Sachs, Morgan Stanley, etc to E-Trade and Fidelity??? 
P.S.  I just can't wait for your response. 

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Investors can learn to do that themselves, and I believe that one of these days somebody is going to start advertising that they will do it for you for a flat dollar total rather than a percentage of the assets.-
------------------
Fee-only people are already doing this.  Academically speaking, the concept makes sense.  However, the real world of supply and demand suggests that an hourly or project wage income will not draw in sufficiently skilled people to get clients what they want...so I would guess that the potential result of this realization by clients is that AUM % fees continue to edge downward.  If you "make" or "lose" people $, the size of the portfolio does determine the $ amount of the gain or loss.  So that's somewhat of an argument for AUM fees.  However, I agree that If I can scale up (or use technology), charge .5% and still do exactly what you charge 1% for, you're in trouble in the long run.  Luckily, switching costs (mostly emotional, spending time, or imagined) protect the 1% guy to some degree for now.

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BankFC wrote:
So, again, I ask you:  What will be catalyst behind this great awakening of formerly content brokerage clients, transformed into motivated do-it-yourselfers, and the subsequent catastophic shift of trillions of assets from Merrill Lynch, Goldman Sachs, Morgan Stanley, etc to E-Trade and Fidelity??? 

Two things that will happen.
1.  A protracted bear market.  As I said when everything is going well goofballs such as you are a luxury that can be justifed, but when things turn south you will become a thorn under their blanket.
I asked this morning, if your real estate agent took 1% of the value of your house out of your checking account every year--just because they sold you the house--how long would you put up with that?
2.  Retirement.  The baby boomers are approaching retirement with significant assets--both earned and saved as well as inherited.  While they're still contributing to their accounts fees siphoned off by goofballs are a luxury that can be justifed.
However, when they turn the corner and intend to live on their investments they are going to be far more aware of some goofball's hands going into their pocket every so often and extracting money for no reason other than they opened the account, and a few times a year make a "Just thinking about you and hope all is well" phone call.
Oh, ane invite them to a "Client Appreciation Event" where they get a plastic lei and a fruit driink with little umbrella.

troll's picture
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Knows Wall St. wrote:
I ask again.  Why should an investor pay a middleman 100 or more basis points to do nothing other than combine the figures on year end mutual fund statements into a summary?
If that's what you think the job requires you're even more clueless than I first imagined...
Knows Wall St. wrote:
Why would somebody with a million dollars not turn $10,000 of it over to an "advisor" to see where they put the money and then simply mirror that allocation with the other $990,000 by buying directly, or through a discount broker?

I suppose you could, if you think opening an account (and mirroring the investments) with someone so new to the business that he'd take an account that small was a wise thing to do...

troll's picture
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Knows Wall St. wrote:Very few of today's "Financial Advisors" do anything other than prepare year end reports and--perhaps--rebalance an asset allocation model among a family of funds.
Given that you never made it in this business actually working with clients, your views don't surprise me. Most washouts try to minimize the work done by people who succeeded and didn't have to seek shelter in the manager's (much less a "floating manager") office.

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Knows Wall St. wrote:My career has been spent looking ahead, ....
Your career was spent accounting for the petty cash receipts, hiring receptionists, making sure the coffee service was satisfactory and abusing the new hires (because you knew the ones that succeeded would be making more than you in just a matter of years, and would treat you like the employee/drag on the bottom line that you were) in an attempt to find someone you could (even monetarily) look down on…<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

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Cowboy93 wrote:
Fee-only people are already doing this.  Academically speaking, the concept makes sense. 

Yes, fee only people are doing it--the difference is there has been no wholesale effort to educate the public.
What could happen--and here I go in my futurist role--is that the mutual funds decide to fund such an "expose" through their lobbying group, The Investment Comany Institute.
I dare say that the ICI is not impressed that the broker dealers will hire high school graduates as "advisors."
There will come a day when arbitration demands will get white hot, the fund families will be named defendants along with your broker/dealers and you.  The funds may well decide that the "problem" is that high school graduates are overselling simple ideas like dollar cost averaging or annual rebalancing as if they were guarantees.
(You may not believe this, but there are registered people who believe that since earnings always go up the market will always go up.)
Anyway, the funds may decide that all they are willing to pay is an old fashioned sales charge for placing the money.  After all, this is a sales job, you're not porfolio managers--so why are you being paid as if you were?

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Knows Wall St wrote: <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
....is that the mutual funds decide to fund such an "expose" through their lobbying group, The Investment Comany Institute.
The what?
Knows Wall St wrote:
I dare say that the ICI is not impressed that the broker dealers will hire high school graduates as "advisors."
Right, the ICI will;
 1) Bite the sales hand that feeds them and
2) Thinks there's any sizeable percentage of the sales force that not a college grads...
Knows Wall St wrote:There will come a day when arbitration demands will get white hot, the fund families will be named defendants along with your broker/dealers and you. 
Of course, because arbitration cases on mutual fund sales are "white hot" and there's no way firms could build suitability screens into their sales and ticketing processes.
Knows Wall St wrote:The funds may well decide that the "problem" is that high school graduates are overselling simple ideas like dollar cost averaging or annual rebalancing as if they were guarantees.
Right, there are so many HS grads in the sales force, and DCA is such and evil thing, and rebalancing, well, why hasn't that been outlawed yet? "As if they were guarantees" oh, that's just a laugh riot coming from someone from your era...
Knows Wall St wrote:
Anyway, the funds may decide that all they are willing to pay is an old fashioned sales charge for placing the money.  After all, this is a sales job, you're not porfolio managers--so why are you being paid as if you were?

A what manager? “Portfolio”?
Perhaps someone should let this "expert" in on the fact that mutual funds have problems enough of their own given their recent brushes with regulators and the threat posed to them by SMAs and ETFs. The last thing they want to do is pick a fight with the sales force...
 
 
 
 
 

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"2) Thinks there's any sizeable percentage of the sales force that are not college grads...<?:NAMESPACE PREFIX = O />

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mikebutler222 wrote:
Perhaps someone should let this "expert" in on the fact that mutual funds have problems enough of their own given their recent brushes with regulators and the threat posed to them by SMAs and ETFs. The last thing they want to do is pick a fight with the sales force...

 
Why should you be paid a percentage of an account's value instead of a sales charge for selling the fund's shares?
 
Do you think that mutual funds ever did it that way--pay a broker dealer, say, 8% for selling the shares and that was it?
 
I think it's a revolutionary idea.  There is no reason on earth that you, or anybody else, should have a claim on a percentage of a client's assets simply because you sold the client some investment products once upon a time.

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mikebutler222 wrote:

Knows Wall St wrote:There will come a day when arbitration demands will get white hot, the fund families will be named defendants along with your broker/dealers and you. 
Of course, because arbitration cases on mutual fund sales are "white hot" and there's no way firms could build suitability screens into their sales and ticketing processes.

If Mr. and Mrs. Client lose money and contact an attorney in an attempt to get it back all the suitability screens in the world will not help.
Just bringing the demand for arbitration kicks extraordinary costs into gear--which is whey the plaintiff bar whores are eager to bring demands since they get a free shot at a juicy settlement.
If thousands of clients approach attorneys the mutual funds will be named too--after all they made the bad decisions on what to invest in.  The sales guy will be named because, theoretically, they decided what funds to buy--and the sales guy's broker dealer will be named simply because they will be named.
I should have mentioned the fourth defendant--the sales guy's manager who will also be named for failure to supervise.
When the firms--especially the funds--get covered up with complaints and legal fees they will reexamine how they're doing business.
It could be the broker/dealers who decide that there is too much exposure in collecting the middleman fee and seek to return to the simple one time sales charge that absolves them of most of the liability for the ongoing results of the funds.
When you stick your hand into the client's pocket every so often you have much more responsibility than when you stick your hand in there just once--when they bought their shares.
There is also the image that the client's money is being "managed."  The average guy is being led to believe that he is getting treatment similar to what trust departments give their trust clients.
When that image becomes tarnished the lawyers get phone calls.
People are funny about their money.

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Knows Wall St. wrote:
I ask again.  Why should an investor pay a middleman 100 or more basis points to do nothing other than combine the figures on year end mutual fund statements into a summary?
Why would somebody with a million dollars not turn $10,000 of it over to an "advisor" to see where they put the money and then simply mirror that allocation with the other $990,000 by buying directly, or through a discount broker?

I have a friend, Frank, who is a college professor. Frank is a smart guy, he teaches environmental science. Generally speaking Frank is a an assute Do-It-Yourself investor. He understands the basics of sound money management as well as risk management. In fact, there were times that I called him to find out what stocks he liked and why. However,Frank does not a good client make. He knows he doesn't need us and makes a joke of our profession. Usually he does this in a group of like minded educational snobs. I repay him by telling him he's part of of the educational tenure problem of do nothing teachers who get paid for well... doing nothing. We'd laugh, and drink beer to our equally useless professional lives.
I recognize (recognice?)that there are the Franks of the world, those who would benefit very little from a professional relationship. These are people who have the time and expertise (or is it expertice?) to do it on their own, as well as the will to do it. Generally, Advisors can add little value to what the Franks are able to do for themselves. I say generally because there are exceptions to every rule. Frank, is an exception to his own rule. That happened one day when he called me and asked if I had any stocks I could recommend that had an environmental bent to them. It turned out that I did. The company was Ballard Power, a fuel cell manufacturer. We bought 5000 shares for Frank in Febuary 1995. Total investment including commission was $31,900.00. We held the stock long term because we really believed that the product was a winner, and it still is. As time went on the stock eventually doubled and then tripled. We were convinced we'd found the next Microsoft so we held on. Meanwhile the stock had split, if I recall, twice, and Frank's position increased to 15000 shares. Then the market craziness started. The tech bubble. BLDP was right on the leading edge. We'd caught the wave perfectly, if unintentionally. In fact, even though the bubble was giving us a great ride we worried it would screw up the stock by dumping it and burying its true value under the heap of Wall Street BS that was taking place at the time. Still we rode the wave and finally it just got too ridiculous. I made the call, SELL! Value at time of the recommendation, $1,500,000. Frank said no, that he would hold because he believed that the stock would go higher. 1.6 mil,Sell, NO!, 1.7 mil,SELL,NO! Frank was holding to his belief that he knew more than I did. I practically pleaded with him to sell. Sell part, sell half, sell something! No was the reply. Even though I'd given him a life changing opportunity, his inner Do-It-Yourself took over. Cheered on by his DIYS club. The stock collapsed and Frank sold in 2002 for a $128k profit. Still a home run, almost 4x his original investment, but no where near 1.5 million. Frank's refusal to listen cost him $1.3 million. How much was my advice worth(or is it advise)? You be the judge.
The epilog is just as ugly. Frank and I are no longer friends. He blames me for his missing the big one. Don't ask by what logic. He's got 1.3 million DIYS reasons not to apply logic. And then there's this. Frank managed to take about a half a dozen of his colleagues down the drain with him. For years he was feeding these people my advice on BLDP. Some lost money. They also blame me. Apparently, per one of these people, I never advised Frank to sell. My records show six sell reccos over a roughly 12 month time period. Not that it matters, because it doesn't. Other clients who followed the advice made a ton of money. Want to marry a client to you for life? Make them a million dollars on one trade.
So, when it comes to Do-It-Yourselfers you can not possibly win. Some are very capable people who truly do not need us. Others devalue our advice regardless of how good it is. Others suffer convenient memory loss. Some are just plain cheap. And there are others who will steal your advice. This one situation with this one client is the sum of all those people. The lesson is not to take these people on as clients.

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Knows Wall St. wrote:BankFC wrote:
So, again, I ask you:  What will be catalyst behind this great awakening of formerly content brokerage clients, transformed into motivated do-it-yourselfers, and the subsequent catastophic shift of trillions of assets from Merrill Lynch, Goldman Sachs, Morgan Stanley, etc to E-Trade and Fidelity??? 

Two things that will happen.
1.  A protracted bear market.  As I said when everything is going well goofballs such as you are a luxury that can be justifed, but when things turn south you will become a thorn under their blanket.
I asked this morning, if your real estate agent took 1% of the value of your house out of your checking account every year--just because they sold you the house--how long would you put up with that?
2.  Retirement.  The baby boomers are approaching retirement with significant assets--both earned and saved as well as inherited.  While they're still contributing to their accounts fees siphoned off by goofballs are a luxury that can be justifed.
However, when they turn the corner and intend to live on their investments they are going to be far more aware of some goofball's hands going into their pocket every so often and extracting money for no reason other than they opened the account, and a few times a year make a "Just thinking about you and hope all is well" phone call.
Oh, ane invite them to a "Client Appreciation Event" where they get a plastic lei and a fruit driink with little umbrella.

No, this will never happen.  Why?  Because clients don't want to think about the potential of having to look in the mirror and blame themselves when a bear market robs them of their savings.
We just went though a bear market a few years ago...all the options available now were available then (discounters), but last time I checked, all us overpriced brokers are still in business.
Nothing is going to change.
You hate us, fruitlessly attempt to cut us down, and try to downplay our sophistication, services, and education, and yet you are powerless to do anything about it.  I will still be a young "overpaid" middleman 10 years from now, and you will probably be dead.
Rest your head on that tonight.

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mikebutler222 wrote:Knows Wall St. wrote:My career has been spent looking ahead, .... Your career was spent accounting for the petty cash receipts, hiring receptionists, making sure the coffee service was satisfactory and abusing the new hires (because you knew the ones that succeeded would be making more than you in just a matter of years, and would treat you like the employee/drag on the bottom line that you were) in an attempt to find someone you could (even monetarily) look down on…<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Mike, you forgot ordering paper clips for the office!!!

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Regarding Frank. Something I do in situations like this that are very rare is simply ask at what point they sell.  10%, 20%, 40% down?   That is where we put the stop loss.   A stop loss is such a simple thing to use yet brokers for some reason don't use them frequently enough in my opinion.  If they think the stock will go up for ever I'm fine with that.  Maybe they are right but just in case lets put a stop at the point where the pain is too great to hold any longer. 
I had a young guy transfer in a pretty large account he got from grand dad recently.  Grand dad said hold forever and that was the clients mentality. I'm fine with that but I also asked at what point would he want to sell.  After much thought he said well I guess I would want out of individual positions if they drop 20%.  So that is where the stops went.
Funny thing is one of the stocks is QCOM.  I pointed out that grand dad had riden that thing all the way through the tech bubble and at one time it was worth a couple hundred k more than it is now.  I think clients understand when you use stop losses in this manner. 

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BrokerRecruit wrote:
I'm guessing that not all of the posters here have the time to either run spellcheck or proofread their posts before submitting.  Perhaps they just don't care when it comes down to it.

If you're talking about me, I do care. The reality is I'm a horrible speller and life is just too short to check every post. I've got an excellent service assistant to save my butt with clients. If that doesn't do it, there's my partner, who is my wife, with dual BAs in English and Business. These people make up for the shortcomings of a grammatically challenged advisor.
As for newbie calling me out on using the wrong word, he got me. I used the wrong word, over and over and over. So what! Don't like my malaprop mastery, straight ahead, keep walking!
 

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tjc45 wrote:
I have a friend, Frank, who is a college professor. 

The epilog is just as ugly. Frank and I are no longer friends.

Stories lose credibility when things like that show up.
That said, the story--true or not--is illustrative of an all too common event.  Clients will never give you credit for the winners and will always give you blame for the losers.
It's not fair, but that's the way it is.
Something that new brokers should keep in mind.  Never tell stories about big losses that you oversaw--even if they're not your fault.

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tjc45 wrote:BrokerRecruit wrote:
I'm guessing that not all of the posters here have the time to either run spellcheck or proofread their posts before submitting.  Perhaps they just don't care when it comes down to it.

If you're talking about me, I do care. The reality is I'm a horrible speller and life is just too short to check every post. I've got an excellent service assistant to save my butt with clients. If that doesn't do it, there's my partner, who is my wife, with dual BAs in English and Business. These people make up for the shortcomings of a grammatically challenged advisor.
As for newbie calling me out on using the wrong word, he got me. I used the wrong word, over and over and over. So what! Don't like my malaprop mastery, straight ahead, keep walking!
 

I wasn't picking out anyone in particular.  I simply think it's a little silly to pick on grammatical errors on this forum.  I think there are better topics to be discussing rather than pointing out that someone used "advise" instead of "advice".  If everyone here feels that they have some value to add, add it - quit picking on people for their grammar/word choice. 

tjc45's picture
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Knows Wall St. wrote:
tjc45 wrote:
I have a friend, Frank, who is a college professor. 

The epilog is just as ugly. Frank and I are no longer friends.

Stories lose credibility when things like that show up.
That said, the story--true or not--is illustrative of an all too common event.  Clients will never give you credit for the winners and will always give you blame for the losers.
It's not fair, but that's the way it is.
Something that new brokers should keep in mind.  Never tell stories about big losses that you oversaw--even if they're not your fault.

Newbie, you got me again. Wow, twice in one day. Want a job as a service assistant? it will give you something else to do with your time. Big benefit, you can tell me what an idiot I am everyday. I'll even let you harrass people on the internet. just no porn sites. Dust off that resume, pm me and I'll tell you where to send it.
On the core issue of fees, I agree with you. On the core issue of fee for value I disagree with you. Of course you don't seem to be much for wanting to discuss core issues. Pot shots, distraction, pettiness, grammer police, that's what gets you off?
 

tjc45's picture
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tjc45 wrote:Knows Wall St. wrote:
tjc45 wrote:
I have a friend, Frank, who is a college professor. 

The epilog is just as ugly. Frank and I are no longer friends.

Stories lose credibility when things like that show up.
That said, the story--true or not--is illustrative of an all too common event.  Clients will never give you credit for the winners and will always give you blame for the losers.
It's not fair, but that's the way it is.
Something that new brokers should keep in mind.  Never tell stories about big losses that you oversaw--even if they're not your fault.

Newbie, you got me again. Wow, twice in one day. Want a job as a service assistant? it will give you something else to do with your time. Big benefit, you can tell me what an idiot I am everyday. I'll even let you harrass people on the internet. just no porn sites. Dust off that resume, pm me and I'll tell you where to send it.
On the core issue of fees, I agree with you. On the core issue of fee for value I disagree with you. Of course you don't seem to be much for wanting to discuss core issues. Pot shots, distraction, pettiness, grammer police, that's what gets you off?
 

KNW, where are you? It's been a whole half hour since I misspelled harass and started a sentence without capitalizing. Or is that capitolizing, that always confusses me. Kinda like ly down and lay down. So where are you? Dinner break? Earley bird special down at the Golden Corral? Earley doesn't look right ot me. When you read this could you check on that for me and let me know?
Job is still open and yours if you want it.

tjc45's picture
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Enough playing with the idiot savant. It's getting on to be 8 o'clock here on the east coast, so I think he's gone to bed anyway. This is an unforunate hijacked thread. I played into it trying to get this guy into a dicussion because HE'S A BROKEN RECORD ON EVERY THREAD. Predictibly, it went how it always goes with him.
SEE NEW TOPIC "OUR VALUE"

troll's picture
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Joined: 2004-11-29

Knows Wall St. wrote:mikebutler222 wrote:
Perhaps someone should let this "expert" in on the fact that mutual funds have problems enough of their own given their recent brushes with regulators and the threat posed to them by SMAs and ETFs. The last thing they want to do is pick a fight with the sales force...

 
Why should you be paid a percentage of an account's value instead of a sales charge for selling the fund's shares?
 
Sounds like you;
 
1) Don't realize that clients already have that choice
 
2) Think mutual funds are the be all and end of of what we do
 
 
Knows Wall St. wrote:
Do you think that mutual funds ever did it that way--pay a broker dealer, say, 8% for selling the shares and that was it?
 
Huh? That was in fact the only way it was done when there were only A shares, no managed accounts, little competition (thus higher front loads then seen today) and tiny trails...
 
 
Knows Wall St. wrote:
I think it's a revolutionary idea.  There is no reason on earth that you, or anybody else, should have a claim on a percentage of a client's assets simply because you sold the client some investment products once upon a time.

You sound deeply confused. Clients who pay an ongoing fee avoided that massive upfront charge you mentioned, are not locked into a single mutual fund family, and at least with most everyone I know, don't buy funds to begin with.
 
 

troll's picture
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Knows Wall St. wrote:mikebutler222 wrote:
Knows Wall St wrote:There will come a day when arbitration demands will get white hot, the fund families will be named defendants along with your broker/dealers and you.
Of course, because arbitration cases on mutual fund sales are "white hot" and there's no way firms could build suitability screens into their sales and ticketing processes.

If Mr. and Mrs. Client lose money and contact an attorney in an attempt to get it back all the suitability screens in the world will not help.
It's rather funny to hear a washout from the "good old days" of commission-driven stock pushing talk about the horrors of mutual fund arbitration cases...
Knows Wall St. wrote:If thousands of clients approach attorneys the mutual funds will be named too--
And this wave of mutual fund arbitration cases will have merit based on what, exactly?
Knows Wall St. wrote:It could be the broker/dealers who decide that there is too much exposure in collecting the middleman fee and seek to return to the simple one time sales charge that absolves them of most of the liability for the ongoing results of the funds.
Have you discussed this legal theory with anyone with a law degree? You really figure you'd be less liable if you sell funds and collect an 8% pop than if you don't get a front load and instead charge an ongoing fee? Really?
Knows Wall St. wrote:
There is also the image that the client's money is being "managed." The average guy is being led to believe that he is getting treatment similar to what trust departments give their trust clients.
Like a trust department? You mean paying massive fees for poor management using in-house common trust funds? That treatment?
BTW, what's with the fixation on mutual funds? Are you of the opinion that most ongoing fee accounts use mutual funds?
Knows Wall St. wrote:
People are funny about their money.

That's the other part of your argument that's just laughable. The idea that mutual funds are more likely to lose money for clients than the border-line boiler-room "you wanna stock, I gotta stock, you wanna bond, I gotta bond" operations of the "good old days" you keep going on about....
I know you think you’re being sly and provocative, but I have to tell you, you sound ignorant of both the past and the current practices of the business…

troll's picture
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Joined: 2004-11-29

Indyone wrote:
mikebutler222 wrote:Knows Wall St. wrote:My career has been spent looking ahead, .... Your career was spent accounting for the petty cash receipts, hiring receptionists, making sure the coffee service was satisfactory and abusing the new hires (because you knew the ones that succeeded would be making more than you in just a matter of years, and would treat you like the employee/drag on the bottom line that you were) in an attempt to find someone you could (even monetarily) look down on…<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Mike, you forgot ordering paper clips for the office!!!

 
Dang, I did!!! 

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