Investment Strategies

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LloydHarry's picture
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Joined: 2006-02-27

Those of you who replied to my original post a few
weeks ago know that I am still in college yet very
interested in this type of business. -- Also, thanks for
the advice.

My new question is this... with so much talk of
making sales (and I know that if you are on
commission sales are your livelihood) . . . How
much of your time is actually spent coming up with
investment strategies?

Do you pick stocks and create your own value/growth
portfolios or do you use other products more often?

I am currently reading "The Intelligent Investor" (the
value investor's bible i suppose) and just finished
"The Little Book that Beats the Market." These types
of strategies are very interesting to me and I am just
wondering if any of you guys/gals implement them in
your business . . .

BankFC's picture
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Joined: 2005-05-27

The short answer is no, in all likelyhood YOU won't.  It just doesn't make sense for most brokers to do that.  Why you ask?
 
Well when you're starting out you have to spend all your time prospecting, and their is very little time left over.  What is left over you will spend grasping all the nuances of financial planning...i.e how to help exec with their nonqual stock options, Net Unrealized Appreciation, Exchange Funds (not exchange TRADED funds), learning how to understand folks current holdings (not just stocks and bonds, but annuities, UIT's, REITS, and everything else under the sun).
By the time you have a sizeable book, you might want to actually reap some of the rewards for all your hard work, so managed money really where it is at.  Otherwise you will be tied to your book constantly (regardless of what some on here may say).
The CLOSEST I have ever heard is a friend of mine who went to work for 2 BIG producers at MS (combined production about 5 million).  All they do is fee based brokerage of individual stocks, along with selling debt transactionally.  But even then, all they are really doing is whatever MS research tells them to do (otherwise, if you blow someone up, it's your own A**, not the firms).
So don't think you are going to come out of college and start being a professional money manager.  You will be a salesman.  Whether you will be a mutual fund salesman, an SMA salesman, a insurance salesman, or whatever else will be somewhat your choice.  Actually, you will be selling whatever people are buying from you, or you will be out of the business.
Ain't as cool as it seems, huh? 

LloydHarry's picture
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Joined: 2006-02-27

Thanks for the reply BankFC...
I ask because the guy I interviewed with at UBS (who DOES have a sizable book) said that he spends a lot of his time screening and evaluating stocks with a value approach.
I also have a good friend who is a young broker at a bank . . . He does not do as much of his own stock analysis.
I realize that the research you are given is usually paramount to your own research when you are focusing on sales, but again wonder how many of you guys dip into the process as your book grows...
Alas, BankFC, it still IS as cool as it seems. As much as people on here seem to try dissuading others from liking the business (and I'll admit, I haven't actually done it yet), I still think I would enjoy it.
It seems there will be no time to worry about picking stocks, especially early on... As you have shown, there are many other things to worry about.

discountbroker's picture
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Joined: 2006-03-05

all full service guys care about is churning their client's
accounts.  if you read the forums here....i would say at least
half do not really care about their clients

babbling looney's picture
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Joined: 2004-12-02

Oh baloney.   If you don't care about your customers, they will figure it out and go elsewhere.  Then you will be out of business.  Most of the regular posters have been in business for over 10 and even 20 years.  You can't stay in business just by churning accounts.
 

Moneytree's picture
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Joined: 2005-12-27

I don't think any of us in "this" business are in the business of stock picking. We may come across a stock or two here and there but, what we really do is develop portfolios based upon a person's risk level and goals.

Firms really don't allow you to do your own research. You need to rec. stocks based upon their approvedresearch options. If one does their own research and the clients portfolios blow up like someone mentioned--good luck to you. You'll find out real fast how much your firms stands beside you.

Since your a student of finance, you've heard about EMH. There have been very few documentated cases of individuals beating the market. We sell. Then we follow up with a mountain of paperwork. If one in our business could beat or even come close to the market returns why would they not go to Wall St. and mint millions?   

Fact is, most fund managers can't beat the market. You'll hear about some hot shot every now and then but guess when you hear about them? After they've burnt out in 5 years.

If you want to pick stocksgo to Wall St. with an IVY League MBA in your back pocket and start out as a CFA and work your way up to a PM.

LloydHarry's picture
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Joined: 2006-02-27

Moneytree wrote:I don't think any of us in "this" business are in the business of stock picking. We may come across a stock or two here and there but, what we really do is develop portfolios based upon a person's risk level and goals. Firms really don't allow you to do your own research. You need to rec. stocks based upon their approvedresearch options. If one does their own research and the clients portfolios blow up like someone mentioned--good luck to you. You'll find out real fast how much your firms stands beside you. Since your a student of finance, you've heard about EMH. There have been very few documentated cases of individuals beating the market. We sell. Then we follow up with a mountain of paperwork. If one in our business could beat or even come close to the market returns why would they not go to Wall St. and mint millions?    Fact is, most fund managers can't beat the market. You'll hear about some hot shot every now and then but guess when you hear about them? After they've burnt out in 5 years. If you want to pick stocksgo to Wall St. with an IVY League MBA in your back pocket and start out as a CFA and work your way up to a PM.
Thanks Moneytree... this makes sense. Picking stocks is not what I want to do per se, but it does interest me. Managing a client's portfolio and building their wealth through other folks' research suits me just fine.
It seems that if you are a broker for a firm, you basically follow that firms research and analysis... which makes fine sense to me. About being a student of finance... actually I am not, I do plan on beginning an MBA this fall, but my undergrad focus has been in Marketing Communications.
As for the comment by discountbroker, I don't know where that came from but I do know some full service brokers who care about their clients. What makes being a discount broker so alluring?

blarmston's picture
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Joined: 2005-02-26

The alluring part for DB is that someone will still pay him a salary even after he flunked out at a real firm....

skeedaddy's picture
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Joined: 2005-06-16

I think you're putting the cart before the horse. This is a process of
learning. Look at my experience for example:

1. Munis, closed-end bond funds, things that are time sensitive and in
limited quantity. (end of year 1)
2. Closed-end bond funds trade below NAV, customers lose 20%.
3. Blue Chip stocks/special situations.
4. Zero-coupon Treasuries (a.k.a.- interest rate call). (end of year 2)
5. Zero-coupon bonds combined with equity funds.
6. More funds, equity and bond. (end of year 3)
7. Bonds funds explode. Govi’s drop by 30% (end of year 4)
8. Cut deal with new brokerage firm.
9. Back to Blue Chip stocks.
10. International funds.
11. International funds blow up, client looses 20%. (end of year 5)
12. Auction Rate Preferreds.
13. Rates keep dropping, should have stayed in zeros.
14. More Blue Chip stocks.
15. Market crashes- clients loose more than 25% in 2 days. (end of year
6)
16. Back to Treasuries.
17. Brokered CDs.
18. Bull market resumes uptrend. Should have stayed in equities.
19. Small cap stocks. (end of year 7)
20. Stop listening to research and firm’s recommendations.
21. Gotta get outta this hole. Learning about market from mentor.
22. Dump all bond mutual funds.
23. Dump all closed-end funds.
24. Back to high beta, technical analysis from mentor.
25. Russian debt crisis and collapse of hedge fund.
26. Internet and Telecom for everyone. (end of year 8)
27. Internet Bubble pops. (Stop-losses came in handy)
28. Market sucks, more closed-end funds.
29. Loss of T&E budget, low production.
30. Market sucks, Mom is in Govis. (end of year 9)
31. Loss of sales assistant, time to cut a deal.
32. Market rebounds.
33. No deal at hand, time to go Indy.
34. Stop talking, walking, quacking like all the other advisors.

Moneytree is full of sh*t. So is Discountbroker and BankFC. This career,
like many others, is a learning process. The doctor must loose a few
patients in the process. I was fortunate enough to find a mentor that
opened my eyes. Some find one earlier than I, others never do.

Find your passion (specialty) and become an expert as early as you can.
The rest will follow. Good Luck.

SKEE

troll's picture
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Joined: 2004-11-29

discountbroker wrote:all full service guys care about is churning their client's
accounts.  if you read the forums here....i would say at least
half do not really care about their clients
yah and you discount fellows would SURELY stop clients from churning themselves out of ignorance, right? 

BankFC's picture
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Joined: 2005-05-27

skeedaddy wrote:I think you're putting the cart before the horse. This is a process of
learning. Look at my experience for example:

1. Munis, closed-end bond funds, things that are time sensitive and in
limited quantity. (end of year 1)
2. Closed-end bond funds trade below NAV, customers lose 20%.
3. Blue Chip stocks/special situations.
4. Zero-coupon Treasuries (a.k.a.- interest rate call). (end of year 2)
5. Zero-coupon bonds combined with equity funds.
6. More funds, equity and bond. (end of year 3)
7. Bonds funds explode. Govi’s drop by 30% (end of year 4)
8. Cut deal with new brokerage firm.
9. Back to Blue Chip stocks.
10. International funds.
11. International funds blow up, client looses 20%. (end of year 5)
12. Auction Rate Preferreds.
13. Rates keep dropping, should have stayed in zeros.
14. More Blue Chip stocks.
15. Market crashes- clients loose more than 25% in 2 days. (end of year
6)
16. Back to Treasuries.
17. Brokered CDs.
18. Bull market resumes uptrend. Should have stayed in equities.
19. Small cap stocks. (end of year 7)
20. Stop listening to research and firm’s recommendations.
21. Gotta get outta this hole. Learning about market from mentor.
22. Dump all bond mutual funds.
23. Dump all closed-end funds.
24. Back to high beta, technical analysis from mentor.
25. Russian debt crisis and collapse of hedge fund.
26. Internet and Telecom for everyone. (end of year 8)
27. Internet Bubble pops. (Stop-losses came in handy)
28. Market sucks, more closed-end funds.
29. Loss of T&E budget, low production.
30. Market sucks, Mom is in Govis. (end of year 9)
31. Loss of sales assistant, time to cut a deal.
32. Market rebounds.
33. No deal at hand, time to go Indy.
34. Stop talking, walking, quacking like all the other advisors.

Moneytree is full of sh*t. So is Discountbroker and BankFC. This career,
like many others, is a learning process. The doctor must loose a few
patients in the process. I was fortunate enough to find a mentor that
opened my eyes. Some find one earlier than I, others never do.

Find your passion (specialty) and become an expert as early as you can.
The rest will follow. Good Luck.

SKEE God Bless...could you ramble any more?  As for me being full of anything, I welcome you to point out where in my post you come to that conclusion.You, as seen by your post, are a single product pusher, not an advisor who utlilizes many tools based on the individual client.  If I were LloydHarry, or anyone else for that matter, I'd ignore you like the piker you are.

Moneytree's picture
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Joined: 2005-12-27

skeedaddy wrote: I think you're putting the cart before the horse. This is a process of
learning. Look at my experience for example:

1. Munis, closed-end bond funds, things that are time sensitive and in
limited quantity. (end of year 1)
2. Closed-end bond funds trade below NAV, customers lose 20%.
3. Blue Chip stocks/special situations.
4. Zero-coupon Treasuries (a.k.a.- interest rate call). (end of year 2)
5. Zero-coupon bonds combined with equity funds.
6. More funds, equity and bond. (end of year 3)
7. Bonds funds explode. Govi’s drop by 30% (end of year 4)
8. Cut deal with new brokerage firm.
9. Back to Blue Chip stocks.
10. International funds.
11. International funds blow up, client looses 20%. (end of year 5)
12. Auction Rate Preferreds.
13. Rates keep dropping, should have stayed in zeros.
14. More Blue Chip stocks.
15. Market crashes- clients loose more than 25% in 2 days. (end of year
6)
16. Back to Treasuries.
17. Brokered CDs.
18. Bull market resumes uptrend. Should have stayed in equities.
19. Small cap stocks. (end of year 7)
20. Stop listening to research and firm’s recommendations.
21. Gotta get outta this hole. Learning about market from mentor.
22. Dump all bond mutual funds.
23. Dump all closed-end funds.
24. Back to high beta, technical analysis from mentor.
25. Russian debt crisis and collapse of hedge fund.
26. Internet and Telecom for everyone. (end of year 8)
27. Internet Bubble pops. (Stop-losses came in handy)
28. Market sucks, more closed-end funds.
29. Loss of T&E budget, low production.
30. Market sucks, Mom is in Govis. (end of year 9)
31. Loss of sales assistant, time to cut a deal.
32. Market rebounds.
33. No deal at hand, time to go Indy.
34. Stop talking, walking, quacking like all the other advisors.

Moneytree is full of sh*t. So is Discountbroker and BankFC. This career,
like many others, is a learning process. The doctor must loose a few
patients in the process. I was fortunate enough to find a mentor that
opened my eyes. Some find one earlier than I, others never do.

Find your passion (specialty) and become an expert as early as you can.
The rest will follow. Good Luck.

SKEE

That's quite a career.

Who needs nobel prize winning research when you can market time your way straight down the toilet?

2. Closed-end bond funds trade below NAV, customers lose 20%8. Cut deal with new brokerage firm.

10. International funds.11. International funds blow up, client looses 20%. (end of year 5)

13. Rates keep dropping, should have stayed in zeros.

15. Market crashes- clients loose more than 25% in 2 days. (end of year

20. Stop listening to research and firm’s recommendations21. Gotta get outta this hole. Learning about market from mentor.

24. Back to high beta, technical analysis from mentor.26. Internet and Telecom for everyone. (end of year 8)27. Internet Bubble pops. 28. Market sucks

29. Loss of T&E budget, low production.31. Loss of sales assistant, time to cut a deal.

skeedaddy's picture
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Joined: 2005-06-16

Moneytree wrote: Firms really don't allow you to do your own research.
You need to rec. stocks based upon their approvedresearch options. If one
does their own research and the clients portfolios blow up like someone
mentioned--good luck to you. You'll find out real fast how much your firms
stands beside you.
Fact is, most fund managers can't beat the market. You'll hear about some
hot shot every now and then but guess when you hear about them? After
they've burnt out in 5 years.

Absolute B.S. Not a voice of experience. Keep listening to the firm's
research. Wall Street killed more Jew than the Nazis.

skeedaddy's picture
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Joined: 2005-06-16

BankFC wrote: What is left over you will spend grasping all the
nuances of financial planning...i.e how to help exec with their nonqual stock
options, Net Unrealized Appreciation, Exchange Funds (not exchange
TRADED funds), learning how to understand folks current holdings (not just
stocks and bonds, but annuities, UIT's, REITS, and everything else under the
sun).

Yeah another expert. In my 12 years in the business, I think I know of one
guy that actually did an Exchange Fund trade. "Net Unrealized
Appreciation"...that's a cool term. Did you come up with that one on your
own?

Soothsayer's picture
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Joined: 2005-02-24

discountbroker wrote:all full service guys care about is churning their client's accounts.  if you read the forums here....i would say at least half do not really care about their clients
Whatever, jackass!  Like the discount guys don't say, "Let me get you set up with a margin account so that you can leverage your assets and do even more $9.95 trades."  How may Schwab clients had to get a a HELOC to cover for the asskicking that they took in their margin account? 

Moneytree's picture
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skeedaddy wrote: Absolute B.S. Not a voice of experience. Keep listening to the firm's
research.

Your guess about the time I've been in business mirrors the track record of your career.

discountbroker's picture
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joedabrkr wrote:
discountbroker wrote:all full service guys care about is churning their client's
accounts.  if you read the forums here....i would say at least
half do not really care about their clients
yah and you discount fellows would SURELY stop clients from churning themselves out of ignorance, right? 

I am just saying that a lot of people on your side of the biz are shady.  Did not mean it as a personal attack. 
For example, lady was a bene of a TOD account.  The full service
broker told her that she had to sell all the stock in the dead person's
account.  Then move the cash to her new account.  Once the
cash was in here account, he  bought all the stocks back. 

As for me.....
I really don't care about my client's.  I'll go ahead and but them
$100,00 k worth of QBID.  I am not required to care about my
client's, only provide them with the correct info when they ask about
complex investment products. 

Full Service is required to do what is best for their client all the
time, not what is best for you wallet.  I just don't fully believe
that most full service brokers have their client's interest ahead of
theirs.  I am sure that most of you are ethical, but some are not
so ethical. 

BankFC's picture
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skeedaddy wrote: BankFC wrote:
What is left over you will spend grasping all the nuances of financial planning...i.e how to help exec with their nonqual stock options, Net Unrealized Appreciation, Exchange Funds (not exchange TRADED funds), learning how to understand folks current holdings (not just stocks and bonds, but annuities, UIT's, REITS, and everything else under the sun).
Yeah another expert. In my 12 years in the business, I think I know of one guy that actually did an Exchange Fund trade. "Net Unrealized Appreciation"...that's a cool term. Did you come up with that one on your own?
Of course you haven't...you've already laid out your sad career on a previous post.  I wouldn't expect you to know or understand what NUA is or done anything AT ALL beyond your 34 point rant...
At one point you were primarily selling BROKERED CD's!!!  You call yourself a broker? 
You are a cold calling, product pushing piker.  A trained monkey could quote yield. 

BankFC's picture
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As for me.....I really don't care about my client's.  I'll go ahead and but them $100,00 k worth of QBID.  I am not required to care about my client's, only provide them with the correct info when they ask about complex investment products. 
 
I really respect the truthfulness of your post.  I'm sure you'll get flamed for it, but I give it to you, at least you are honest.

skeedaddy2's picture
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BankFC wrote:You are a cold calling, product pushing piker.  A trained monkey could quote yield. 

90% of your business is in annuities, and YOU CALL ME a product pusher?

Why don't you go and work on 'net unrealized gains' and other
'nuances'. Doesn't some victim, er, old lady have a CD maturing today?

radernation-1's picture
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Everyone on here makes some great points . But lets break it down. First to discount broker the philosophy is you get what you pay for. There are people that buy stocks from you for $9.95. Thats ok. But there are people that want a full service broker . I do my own research and I do the other things that are needed like listening to the conference calls, looking at the quarterly reports ,and of course do my own research. Thats called FULL SERVICE. If people want to go online for 9.95 more power to them . Its called choices . Do you want to fix your own brakes or pay up to have them done for you ?
To the Bank man I would say to you ,not everyone can be a financial planner and help people with their annuities, funds,etc. There are many people out there that want good stock ideas . These people have financial planners already. I tell them upfront I focus on giving you stock ideas for growth/speculation. Its called a business model.
As far as what you said rgd research and lawsuits. My firm is indy so I pick my own research tools and all clients must sign a penny stock waiver for ANY stock they wish to buy under ten dollars.
Joe ,you and SKee make great points as well. But I  do need to get back to work. I enjoy reading both of your guys posts. I am not attacking anyones posts here . Just pointing out that there are people that can have DIFFERENT business models and do the right thing.
Finnally, to the new guy. The bottom line is this . When I go to all my networking events here in the valley. I see and hear all of these financial planners say the same thing. "I help people with their financial needs" (yawn) I would tell you thats what people hear all the time. Its boring and predictable . People want a compelling reason to talk to you . Find one or two good stock ideas to talk to prospects about to get them in the door. And then move forward. Remember, people can buy a VA or Fund from anyone on the street . I can tell you that your competition will probably not be doing it. Also listen to the other guys that post on this forum. They have some good ideas as well. Especially the ones I mentioned on here today.
Well like the George Clooney movie
"Good Night ,and Good Luck" 

troll's picture
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Joined: 2004-11-29

discountbroker wrote:
joedabrkr wrote:
discountbroker wrote:all full service guys care about is churning their client's
accounts.  if you read the forums here....i would say at least
half do not really care about their clients
yah and you discount fellows would SURELY stop clients from churning themselves out of ignorance, right? 

I am just saying that a lot of people on your side of the biz are shady.  Did not mean it as a personal attack. 
For example, lady was a bene of a TOD account.  The full service
broker told her that she had to sell all the stock in the dead person's
account.  Then move the cash to her new account.  Once the
cash was in here account, he  bought all the stocks back. 

As for me.....
I really don't care about my client's.  I'll go ahead and but them
$100,00 k worth of QBID.  I am not required to care about my
client's, only provide them with the correct info when they ask about
complex investment products. 

Full Service is required to do what is best for their client all the
time, not what is best for you wallet.  I just don't fully believe
that most full service brokers have their client's interest ahead of
theirs.  I am sure that most of you are ethical, but some are not
so ethical. 
That sorta sums it all up doesn't it? I suppose that's why so many advisors go to discount firms when they wash out of their training programs....Yes there are plenty of not so ethical folks on the full service side, and it's sad.  Then again, how many of those problems are created by high quotas and sales pressure?  Folks will do some desparate things when they're trying to keep their jobs!

BankFC's picture
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Joined: 2005-05-27

Skee,
Further displaying your lack of intelligence, you generalize about something (my business) that you have no knowledge.
Annuities make up a nice portion of my business (about 55% of my book), mainly due to the fact that I do ALOT of 410K rollovers, and the folks I meet would NEVER do business with someone like you. 
They don't want to be "called with a stock idea."  They make money by saving it, every paycheck, for years until they get ready to retire and they have 3 or 4 or 5 (my avg client IRA balance is just shy of 350K)hundred thousand that they have to rely on for the rest of their lives.  They don't have the desire or inclination to constantly be asked to make decisions regarding their investments.  That's my job.
Or they made they're money in real estate (I work with a lot of developers) who take enough risk as it is, and don't need/want to feel unsafe with their retirement money.
Point being, these folks would NEVER EVER do business with someone like you.  Ever. 
So keep pumping brokered CD's and auction rate preferreds...you are a joke. 

skeedaddy2's picture
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Joined: 2005-09-14

radernation-1 wrote: 

Finnally, to the new guy. The bottom line is this . When I go to all
my networking events here in the valley. I see and hear all of these
financial planners say the same thing. "I help people with their
financial needs" (yawn) I would tell you thats what people hear all the
time. Its boring and predictable . People want a compelling reason to
talk to you . Find one or two good stock ideas to talk to prospects
about to get them in the door. And then move forward. Remember, people
can buy a VA or Fund from anyone on the street . I can tell you that
your competition will probably not be doing it.

Well said and I do appreciate the kind word.  Now let's go get us some of that those net unrealized gains.

troll's picture
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skeedaddy wrote: Wall Street killed more Jew than the Nazis.
Huh?

troll's picture
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discountbroker wrote:   I just don't fully believe that most full service brokers have their client's interest ahead of theirs. 
That's pretty rich coming from a guy on the "make investment decisions on your coffee break" side of the biz where the money is made by encouraging the ill-informed to be the worst sort of investor, the one's most likely to lose their shirts, the "active trader"....
 

troll's picture
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skeedaddy wrote: Yeah another expert. In my 12 years in the business, I think I know of one guy that actually did an Exchange Fund trade. "
 
Now you know two  

babbling looney's picture
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And three 

BankFC's picture
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Skeet,
I think my point has been made.  How are those National Bank of Wichita 6 month CD's selling today?    

discountbroker's picture
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mikebutler222 wrote:discountbroker wrote:   I just
don't fully believe that most full service brokers have their client's
interest ahead of theirs. 
That's pretty rich coming from a guy on the "make investment
decisions on your coffee break" side of the biz where the money is made
by encouraging the ill-informed to be the worst sort of investor, the
one's most likely to lose their shirts, the "active trader"....
 
Clients are expected to understand what they are doing where I work, we
give them the tools to make their own decisons (This is not a
Waterhouse Ad).  I don't really care what they buy or sell, so
long as they keep hitting that trade button and adding to that margin
debit everyday (I am joking)......

but really.....
there are some shady guys on your side........
there is shady people on my side of the biz as well.....

Moneytree's picture
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radernation-1 wrote: As far as what you said rgd research and lawsuits. My firm is indy so I pick my own research tools

Same boat here. Now, are those research tools found on a pre-approved list that your firm allows you to pick stocks from or are your research tools something that you developed yourself?

For my firm, individual brokers can't make stock rec. on their own. Must come from a properitiary or third-party approved list.

troll's picture
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discountbroker wrote: mikebutler222 wrote:
discountbroker wrote:   I just don't fully believe that most full service brokers have their client's interest ahead of theirs. 
That's pretty rich coming from a guy on the "make investment decisions on your coffee break" side of the biz where the money is made by encouraging the ill-informed to be the worst sort of investor, the one's most likely to lose their shirts, the "active trader"....
 
Clients are expected to understand what they are doing where I work, we give them the tools to make their own decisons (This is not a Waterhouse Ad).  I don't really care what they buy or sell, so long as they keep hitting that trade button and adding to that margin debit everyday (I am joking)......but really.....there are some shady guys on your side........there is shady people on my side of the biz as well.....
There are shady people in every line of work. OTOH, you part of the biz is BUILT on encouraging behavior that we all know is destructive to the average investor. Look at the discounter's ads. You're in the last position to consider yapping about anyone else's ethics.

rightway's picture
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We run around 5 equity strategies.  2 value, 2 growth, and a
dividend strategy.  We use quant data for buy and sell.  We
run them in a discretionary format so I am the portfolio manager, but
we provide monthly updates and quarterly performance reports for the
clients.  They work like a charm, and its less expensive than most
funds and money managers.  They work like a charm and they can
only get it from me.  This has produced many referrals and
additions, so it is well worth the time.

BankFC's picture
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Joined: 2005-05-27

Rightway,
You are great example.  You work on a teamof advisors with assistants, have many years experience, are a CFP, and only NOW (for the past few years from what I gather) are you running customized portfolios.
I think you would agree that there is NO WAY someone trying to build a new book, with the type of asset requirements at a firm like ML, could possible do as a new person in the business what you and your team does at this point in you careers.
It's just a common misconception. 

BankFC's picture
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Joined: 2005-05-27

My point is this business is so hard at first because you must simultaneously be learning product, constantly be prospecting, educating yourself on taxes/financial planning stategies, and be cultivating your sales/closing skills...ALL AT THE SAME TIME.
There is zero time left to do quant analysis, technical analysis, or any other kind of analysis on individual investments.  You have no choice but to use managed products.  So it's a little bit of a shock for those who think they will be watching the market all day. 
Hell, some days I worked all day and I don't even know what the market did.  It doesn't matter from a day to day basis. 

LloydHarry's picture
Offline
Joined: 2006-02-27

rightway wrote: We run around 5 equity
strategies.  2 value, 2 growth, and a
dividend strategy.  We use quant data for buy and
sell.  We
run them in a discretionary format so I am the
portfolio manager, but
we provide monthly updates and quarterly
performance reports for the
clients.  They work like a charm, and its less
expensive than most
funds and money managers.  They work like a
charm and they can
only get it from me.  This has produced many
referrals and
additions, so it is well worth the time.

Now this is what I was talking about. That is pretty
darn neat rightway. Is the process that others have
described (building up a large book of clients and
then later in the process developing a team and your
own investing strategies) how it worked in your
case?

I realize that there is just too much going on in the
early stages of becoming a broker. I just think that I
would rather give people sound investing
strategies/advice --- or put together a portfolio or fund
that can compete --- than try to force transactions in
order to make money...

LloydHarry's picture
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Joined: 2006-02-27

... that last bit came out a little wrong. I'm sure most
full-service brokers make transactions in order to
satisfy a clients investing needs... but I would hate to
see myself even thinking about a situation where I
would be having to make trades for commission's
sake instead of for a client's benifit.

babbling looney's picture
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Joined: 2004-12-02

Then you need to be an independent advisor, where you decide how much income or how litttle income you want to make. If you work for someone else (Jones, SB, ML or other wirehouse) you are under a production quota and must reach your goals or you are out the door.  Actually independent BDs also have production quotas or else they will either drop you or you have to pay an accomodation fee (for being a pain in the butt to them without making them money  . Usually the requirments are are much less than that required at a wirehouse.  I usually meet mine in the first month or two of the year.
That is why I became an independent advisor.  If I want to waste time typing to you on this board and not make a required number of cold calls... It is my business. My production goals are my own.....well mine and the utility and mortgage company's.  Obviously, we all need to make a living.
Also I understand (I think) that the minimum production can be shared by several brokers.  For example: if the office goal is to have 500k of production to be a stand alone office then maybe  it will take 2 or 3 people to make the minimum.
 

LloydHarry's picture
Offline
Joined: 2006-02-27

babbling looney wrote: Then you need to be
an independent advisor, where you decide how
much income or how litttle income you want to
make. If you work for someone else (Jones, SB, ML
or other wirehouse) you are under a production
quota and must reach your goals or you are out the
door.  Actually independent BDs also have
production quotas or else they will either drop you or
you have to pay an accomodation fee (for being a
pain in the butt to them without making them money
 . Usually the requirments are are much less than
that required at a wirehouse.  I usually meet mine in
the first month or two of the year.
That is why I became an independent advisor.  If I
want to waste time typing to you on this board and
not make a required number of cold calls... It is my
business. My production goals are my own.....well
mine and the utility and mortgage company's. 
Obviously, we all need to make a living.
Also I understand (I think) that the minimum
production can be shared by several brokers.  For
example: if the office goal is to have 500k of
production to be a stand alone office then maybe  it
will take 2 or 3 people to make the minimum.
 

You might be right about the independent advisor
route... I DO think I could meet selling quotas, etc....
but folks on here seem to portray it as very difficult...
and it seems clear that the brokers who find it very
difficult end up sacrificing integrity in order to make a
living -- or they quit or get fired.

I mean, I think I could treat clients right and make a
boatload of money, but, hey, don't we all?

I am still curious as to how rightway's business life
has unfolded....

troll's picture
Offline
Joined: 2004-11-29

babbling looney wrote:
 If you work for someone else (Jones, SB, ML or other wirehouse) you are under a production quota and must reach your goals or you are out the door. 
I hear this "quota" line often, but aside from my training time at ML, I've yet to see it in real life. Granted, firms will clean house (like MS did last year) and kick out brokers doing under some very, very low number (LOS 8, under $225k was MS's line last time) every so often, but I hardly think it's fair to call that a quota.

troll's picture
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Joined: 2004-11-29

discountbroker wrote:
mikebutler222 wrote:discountbroker wrote:   I just
don't fully believe that most full service brokers have their client's
interest ahead of theirs. 
That's pretty rich coming from a guy on the "make investment
decisions on your coffee break" side of the biz where the money is made
by encouraging the ill-informed to be the worst sort of investor, the
one's most likely to lose their shirts, the "active trader"....
 
Clients are expected to understand what they are doing where I work, we
give them the tools to make their own decisons (This is not a
Waterhouse Ad).  I don't really care what they buy or sell, so
long as they keep hitting that trade button and adding to that margin
debit everyday (I am joking)......

but really.....
there are some shady guys on your side........
there is shady people on my side of the biz as well.....

Yes but are you REALLY joking?Discount brokers hand out perks to ACTIVE traders just like the casinos give out comps in Las Vegas......hmmmmmmmm

blarmston's picture
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Joined: 2005-02-26

yeah, you know its pathetic when they give out IPOD's for openeing an account.... That really goes over with the affluent....

rightway's picture
Offline
Joined: 2004-12-02

The only quotas I have ever had were at a bank.  Any rep making a
decent living at ML is not under the pressure of any quotas, other than
the ones ones they set for themselves.  The new reps do have big
quotas to meet to get them going quickly...and those that make are
thankful for them when they graduate.  I run the POA program
(rookie brokers) at our ML office, and every last one of them have
individually managed equity accounts.  Our process does not take
up much time, all of our POA's get trained on 1 of the strategies right
off the bat. 

I am on a team and we are able to segment responsibilities, which is
why we can run 5 strategies.  I see no reason why a new sole
practitioner cannot run 1 strategy as our POA's do.  With that
said, the first strategy they do only changes positions monthly, so it
is not real active.

To be really good at growing fast we have to find some way to be
different.  It can only be done a few ways, and this is one of
them.   There are others, but I say find a model that is easy
to implement and manage, find a platform to  run it on, and go for
it!

We have 1 strategy that was up 34% over the last 12 months
(feb-feb).  This unusual performance has given us several
substantial additions and referrals; plus we charge 1.5% and started
with about 20 million in it.  That is 6.8m increase at
1.5%...$102,000 in additional revenue.  Trust me, I spent less
time on this that going out prospecting for an additional 6.8m in
assets.   

rightway's picture
Offline
Joined: 2004-12-02

babbling looney wrote:Then you need to be an independent advisor, where you decide
how much income or how litttle income you want to make. If you
work for someone else (Jones, SB, ML or other wirehouse) you are
under a production quota and must reach your goals or you are out the
door.  Actually independent BDs also have production quotas or
else they will either drop you or you have to pay an accomodation fee
(for being a pain in the butt to them without making them money  .
Usually the requirments are are much less than that required
at a wirehouse.  I usually meet mine in the first month or
two of the year.
That is why I became an independent advisor.  If I want to
waste time typing to you on this board and not make a required number
of cold calls... It is my business. My production goals are my
own.....well mine and the utility and mortgage company's. 
Obviously, we all need to make a living.
Also I understand (I think) that the minimum production can be
shared by several brokers.  For example: if the office goal is to
have 500k of production to be a stand alone office then maybe  it
will take 2 or 3 people to make the minimum.
 

We can charge between 50 bp and 3% and run discretionary or
non-discretionary portfolios.  Our discretionary portfolios can be
run just like a fund (I decide to sell ABC and buy XYZ I process 1
trade and all 50 accounts in the strategy are done).  Everything
is on a fee basis so there is no incentive to over-trade.  The
quotas are only for rookies, and they are based on fee based assets,
not production.  The end quota is basically 15 mil within 2
years....which should be doable for good rep. 

I will admit though, I am intrigued with owning my own firm.

Moneytree's picture
Offline
Joined: 2005-12-27

rightway wrote: We have 1 strategy that was up 34% over the last 12 months
(feb-feb).  This unusual performance has given us several
substantial additions and referrals; plus we charge 1.5% and started
with about 20 million in it.  That is 6.8m increase at
1.5%...$102,000 in additional revenue.  Trust me, I spent less
time on this that going out prospecting for an additional 6.8m in
assets.   

Congrats on the #'s

That $102,000 additional revenue is ML revenue not yours. As we see from your payout grid (if accurate) your getting 50% of that max.

Being indy, you'll get an additional $15,000 to $20,000 more than your half of the $102,000. Or on the whole $26.8 mil you'd get around $75,000 more per year. (Assume all 5 strategies have the same amount that equals $400,000 per year.)

What does ML do for you to deserve that kind of coin annually?

rightway's picture
Offline
Joined: 2004-12-02

Moneytree wrote: rightway wrote: We have 1 strategy that was up 34% over the last 12 months
(feb-feb).  This unusual performance has given us several
substantial additions and referrals; plus we charge 1.5% and started
with about 20 million in it.  That is 6.8m increase at
1.5%...$102,000 in additional revenue.  Trust me, I spent less
time on this that going out prospecting for an additional 6.8m in
assets.   

Congrats on the #'s

That $102,000 additional revenue is ML revenue not yours. As we see
from your payout grid (if accurate) your getting 50% of that max.

Being indy, you'll get an additional $15,000 to $20,000 more than
your half of the $102,000. Or on the whole $26.8 mil you'd get around
$75,000 more per year. (Assume all 5 strategies have the same amount
that equals $400,000 per year.)

What does ML do for you to deserve that kind of coin annually?

I think of that often.  ML provides the institutional platform,
the perormance reporting, and about 75% of my research that got us
those returns.  Like it or not, the Brand has gotten us into RFP's
that are very large, and we only seem to compete with SB, Goldman,
Northern Trust, etc...  I have never once seen an smaller
independent money manager in there. 

Besides that, I happen to just plain ike working at Merrill
Lynch.  Its a good firm, with good people, that have been very
good to me. 

I have worked hard to build a nice team, we have a niche, we all make
plenty of money, we make all of our own hours and vacations, and
mangement is very good to us, so going indy at this point is not even
an entertaining option...it just does not fit our business model. 
Thanks for the non-sarcastic query and compliement- it is apprecieated.

skeedaddy2's picture
Offline
Joined: 2005-09-14

It sounds like Rightway is on the right track. That is, offering something
that the client can't get by simply walking across the street. That's my
approach now that I'm building my 3rd book. No thanks to Mr. Wall
Street.

BankFC, on the other hand, still can't decide whether to get his CFP or his
CFA. He's trying very hard to get the respect he thinks he deserves. I
have friends at several bank brokerages; Wachovia, Citibank and HSBC.
They produce more than double what I produce, but they still have an
inferiority complex. Or better said, a feeling of inadequacy. I think its a
pretty decent gig if you can't make it on your own, right?

BankFC's picture
Offline
Joined: 2005-05-27

I love it...
DAYS LATER skeet is still fuming over internet posts.  Skeet, I had forgotten all about you little guy.  Thanks for reminding me.
Good luck on that 3rd BOOK of yours...  

bankrep1's picture
Offline
Joined: 2004-12-02

No inferiority complex here I take money all day from Merril, LPL, AMEX, etc I don't discriminate.  The longer I sit where I sit the more people sign up to see me.  My phone rings.  I don't remember what a cold call is, I can't even respond to all the people who want to talk to me.
I would say if someone has an inferiority complex it is more of a personality issue than where they work.  I am confident if I decided I wanted to work at Merril for example they would hire me and my clients would follow me, however, I am quite happy where I am.  If it ain't broke don't fix it.

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